Publications

Elevated term premia likely driven by fiscal and institutional risks keep long-end yields high despite stable inflation expectations. Outside isolated episodes of turbulence, markets have reflected favorable conditions over the year and throughout the easing cycle.

The ECB followed the expected script on Thursday and kept the deposit facility interest rate unchanged at 2%. The decision, adopted unanimously, reinforces that the institution has entered a prolonged phase of interest rate stability, in which monetary policy loses some prominence.

At this stage, the Board will likely refocus on the risks associated with the persistence of core inflation—particularly in services—and on the temporary inflation shock expected in early 2026, despite the significant weakness of the economy and the strength of the MXN.

The outlook for the global economy in the second half of the year is proving more positive than expected around April, when the protectionist shock from the US economy materialized.

Unless the labor market weakens more decisively or tariff-driven price pressures fade faster than expected, the FOMC is likely to remain on hold in January and adopt a more patient, data-dependent posture thereafter.

November inflation was 0.07% monthly and declined to 5.3% annual, its first drop after four consecutive monthly increases. The fall was driven mainly by food and some services, while regulated prices continued to put upward pressure via water and fuel tariffs.

Between 2025 and 2027, GDP will be driven by domestic demand: resilient household consumption, supportive public spending and investment boosted by a healthier construction sector. Persistently high inflation, cautious monetary policy and a wide fiscal deficit weigh on the outlook.