Publications

The global environment faces geopolitical risks and the onset of the Trump 2.0 administration. Although Latin America is no stranger to uncertainty, it has shown resilience. Colombia is recovering amid global and domestic challenges, with persistent inflation that led the central bank to begin a tightening cycle.

Treasury yields declined following a softer-than-expected January headline CPI reading, which continued to indicate limited tariff pass-through. However, the inflation report also signaled that disinflation momentum in cyclical components has somewhat slowed.

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 inflation outlook still faces upside risks, as firms likely remain committed to passing tariff-related cost increases through to consumers, underscoring the need for the Fed to “keep [their] eye on inflation and not declare victory prematurely.”

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.

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.

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.