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Large fluctuations in the USD/MXN exchange rate impact Mexican migrants' decisions on the amount to remit. In August, the peso depreciated 5.4%, which boosted a 9.3% growth in remittances to Mexico in dollars and an increase converted into pesos of 17.0% in real terms.
In a backdrop of an “improving” inflation outlook and worsening growth prospects, a majority of members seem to think the central bank has ample wiggle room to cut rates. The forward guidance now strongly suggests that Banxico is set to embark in a streak of consecutive rate cuts ahead.
In view of the lags of monetary policy, we think that Banxico is already late in adjusting the excessively high real ex-ante rate, and thus, the monetary policy stance is set to continue to weigh on the economy in the coming quarters.
Remittances have been volatile over the past five months. Increases have been reported in two of them (April and June, even months) and declines in three months (March, May and July, odd months). In August, the peso depreciated 5.4%, so the nex…
Our base case is a split 3-2 vote in favor of a 25bp rate cut to 10.75% with a majority of members acknowledging a weakening economy and increased confidence about the inflation outlook, but the sudden peso depreciation following the weekend’s …
The depreciation of the Mexican peso (MXN) against the dollar (USD) of 7.6% in June may partly explain this observed increase in remittances. Mexicans abroad take advantage of this temporary rise to send more dollars, which translates into more pesos for their relatives.
In the last 5 years, the effect of “Mother's Day” drove the arrival of 6.5% more remittances in the month of May, compared to the trend marked by the adjacent months of April and June. In 2024, this translates into an amount close to 364 million more dollars in remittances.
Board members voted 4-1 to hold rates steady at 11.00%. The fact that the decision wasn’t unanimous came as a bit of surprise considering the recent peso weakening and that Banxico was set to revise up its short-term headline inflation forecast…
Banxico will most likely suggest it will proceed with caution, at least until more information is available about the judicial reform and the type of fiscal adjustment that will be implemented next year to fulfill the federal government’s commi…
After the start of the pandemic in the US, the Latino employed population had a more dynamic recovery, and by November 2021, 19 months after its lowest point, it had already been able to recover to its pre-pandemic levels. In contrast, the non-…
While members continued to state that “the disinflation process is expected to continue,” the stickiness of core services inflation drove Banxico to revise up its inflation forecasts after considering that “inflationary shocks are foreseen to take longer to dissipate.”
The favorable core inflation trend gives Banxico room to continue lowering the policy rate, which will remain tight during 2024-25 despite a gradual rate cut cycle, but we now expect Banxico to pause the rate cut cycle this week and take rates down to 9.75% by year end.
