Publications

Powell described today’s move as “a risk-management cut,” with rising downside risks to the employment mandate making it appropriate to resume “moving in the direction of neutral.”

With a 25bp cut widely expected, the key question is whether the Fed will frame it as a fine-tuning of its current moderately restrictive stance or as a renewed easing cycle toward a more neutral stance.

National inflation in August was 1.9% month-on-month, remaining at the same level as the previous month despite the full impact of exchange rate and interest rate movements at the end of July. This was slightly below analysts' expectations.

The article analyzes the dangers of political interference in central bank decisions, in reference to the recent actions of the President of the United States, Donald Trump, and his attack on the institutional framework of the Federal Reserve.

Three developments shaped the Treasury market over the past month: a weak jobs report, a dovish tone from Powell at Jackson Hole, and renewed political pressure stemming from Trump’s push to replace Governor Lisa Cook from the Fed’s Board.

In June, real growth in outstanding loans to non-financial private sector slowed to 5.4% annually, its lowest level since April 2024, as the surge in demand ahead of US tariffs faded. Deposits registered a slower overall growth (3.6% in real annual terms), influenced by the weakness of the economy's revenue sources.

The absence of new language suggesting increased caution—despite recent core inflation stickiness—indicates that most members remain open to continuing the easing cycle, albeit at the current more gradual pace of 25 bps per meeting.

Lingering challenges for the growth outlook should maintain Banxico’s confidence that monetary policy can (and should) continue to ease. We think Banxico will remain confident in further services disinflation ahead and will proceed with a 25bp rate cut this week.