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A key indication that Banxico's primary concern has shifted from inflation to growth is its acknowledgment, for the first time, that “since the inflationary episode has been left behind,” the fight against inflation is at a new stage.

In contrast to the Fed, who held rates unchanged last week, Banxico has room to continue cutting rates. A low exchange rate pass-through and deeper domestic capital markets grant Banxico greater policy independence from the Fed than in the past.

Banxico could keep the door open to a third 50bp cut in May before slowing down to more cautious 25bp adjustments. This would strengthen our expectation that Banxico will bring down the policy rate to a below-consensus 7.5% by the end of this year.

Remittances to Mexico start the year with growth. In January, 4,660 million dollars arrived in family remittances, +1.9% compared to the previous year.

It unequivocally signaled that it remains set to keep cutting rates steadily ahead and hinted that in the absence of any major events, it is likely to consider additional 50bp cuts at upcoming meetings.

Below 4.0% inflation, easing core services inflation, softer aggregate demand, a cooling labor market, a peso that continues to hold up, and an overly restrictive monetary policy stance, keep the door wide open for a larger 50bp cut.

However, we think that the best timing to cut the policy rate by 50 bps was today, since the window will likely close early next year if Trump imposes tariffs and a context of global risk aversion hits the peso, turning Banxico even more cautious.

Although we think there is a 40% chance of a 50bp cut, the Board will most likely end sticking to another 25bp cut. A 50bp rate cut would be a sound policy decision considering the excessively restrictive real ex-ante rate and the progress of disinflation.