Banxico latest publications
A notably dovish tone alongside a widening negative output gap backdrop points to further cuts in line with our view. • Banxico strikes again a remarkably and warranted dovish tone.
We are sticking with 50bp cuts in the policy rate in each of the 2020 remaining scheduled meetings (to 3.00%). Forward guidance is unlikely but we expect Banxico to remain dovish and to brush aside the recent temporary and supply-driven inflation increase.
Since the arrival of the coronavirus to Mexico, Banxico has reduced the monetary policy rate by 2 percentage points, bringing it from 7% to the current level of 5%. The central bank can still lower it by at least another two percentage points and bring it down to 3% without posing a risk for inflation.
The liquidation process of Banco Ahorro Famsa begins. Consumer loans are no longer driving total private sector financing. Bank deposits reverse the weakness shown since the second half of 2019.
July 1, 2020
Mexico | From 320 to 380 million dollars of additional remittances due to "Mother's Day"
Remittances to Mexico are unstoppable, despite the difficult economic conditions due to the Covid-19 crisis, 3,379 million USD reached Mexico, + 3.0% compared to the same month last year. In real terms, due to the exchange rate depreciation, they grew 23.8%.
Banxico cut the policy rate by 50 bp to 5.0% and surprisingly made significant dovish tweaks to the wording of the statement.
Yet, we continue to expect Banxico to cut the policy rate until it reaches c. 0% real levels by year-end ie, 3.0% to 3.5%. The Board’s concerns on the ER should have eased in the intermeeting period.
We expect headline inflation to increase 0.58% MoM in May, thereby accelerating to 3.04% YoY from 2.15% in April. We anticipate a 0.36% MoM core inflation increase (3.71% YoY, up from 3.50% in April).