Publications

We believe it will still have scope to resume gradual rate cuts later this year, as both weak domestic demand and the continued strength of the peso should help contain inflationary pressures going forward.

We expect Banxico to revise up its inflation forecasts. Besides, the forward guidance will likely remain unchanged, thus signaling that March would be too soon to resume the easing cycle.

The FOMC will likely continue to emphasize optionality and data dependence as possible inflationary pressures from tariffs could have been masked thus far by import frontloading and the offsetting cooling of shelter inflation.

The muted market impact following Powell’s stark message against setting interest rates “following the preferences of the President” likely reflects low confidence in the lawsuit’s prospects.

The Board noted the uncertainty surrounding the inflation shock expected in early 2026 stemming from recently approved fiscal measures, which “are estimated to have a temporary effect, not necessarily proportional, on prices.”

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.

While a highly divided vote is likely, we see little upside for the Fed in delivering a surprise pause. A key takeaway will likely be that the room for “risk-management” cuts has run their course and the Fed will pause early next year.