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Divisions among Fed members before the blackout period are evident: the hawks think the Fed needs to go further, others seem to support a pause to wait until the economic picture becomes clearer, and some others seem to think that the Fed has done enough to bring inflation down.
With this decision, Banxico ended the fastest ever rate-hiking cycle, acknowledged that a "disinflationary phase is underway" but stated that it will keep the policy rate “at its current level for an extended period”
The next move is not around the corner but will be a cut. Banxico might start to cut rates in 4Q. We think it should .
The end of the pandemic also marked the end of more than a decade of near-zero interest rates, fueled by ample liquidity from central banks.
There was some suspense ahead of last Thursday’s meeting of the European Central Bank (ECB) as to the size of the rate hike (between 25 and 50 basis points), with the ECB ultimately choosing the lesser of two evils.
The overall tone of the statement remained hawkish amid first-quarter developments in the real economy, but for the first time since the beginning of the tightening cycle the Fed no longer explicitly “anticipates” the need for more hikes ahead.
Consumer prices rose by 2.4% m/m in April, lower than both our expectation and consensus (2.6%, 2.7% respectively), whereas annual inflation came down to 43.7% from 50.5% on favorable base effects. We expect year-end consumer inflation to be 45%, assuming a manageable depreciation of the currency after the elections.
Markets now forecast two 25bp rate cuts for the two last FOMC meetings this year in November and December. We continue to expect that after this final hike the Fed will pause for the remainder of the year.
At its April meeting, the Central Bank increased the monetary policy rate by 25bp, bringing it to 13.25%. The vote was split, with 2 members voting in favor of holding rates steady, one in favor of a 50bp increase and 4 in favor of a 25bp incre…
As suggested by the FOMC last month, “some additional policy firming” will likely mean that the Fed will decide to take the fed funds rate to a 5.00- 5.25% target range peak next wednesday through a final 25bp rate hike.
The Board of the Central Bank decided to maintain the monetary policy rate at 7.75% in April. The Bank maintained the monetary policy stance understood as the real ex-ante policy rate at a restrictive level.
Consumer prices rose by 2.3% in March, lower than our expectations (2.5%) and consensus (2.8%) while annual inflation neared 50.5%. We maintain our year end inflation forecast of 45% but acknowledge upside risks due to OPEC+ oil production cut, potential minimum wage hike in July, ongoing high inertia and robust demand.
