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Typically, short-term changes in geopolitical risk are monitored by high-frequency, news-based indices, which usually revert to the mean after some time. We complement those measures by developing new structural geopolitical risk (SGR) and economic fragmentation (SEF) country-specific indices since the 1960s.

The impact of geopolitical risks on economic phenomena is undeniable, and demand for research in this field is steadily increasing from governments, regulators, the private sector and multilateral institutions.

Mid- and long-term Treasury yields have pulled back from last month’s highs amid soft inflation prints and dovish signals from Fed officials like Bowman and Waller, who have voiced support for a July rate cut.

Despite core inflation breaching Banxico’s tolerance band, most Board members are likely to remain forward-looking, as weakening domestic demand is expected to continue weighing on consumption and therefore support a downward trend in services inflation.

In April 2025, the fade out of the exchange rate depreciation influenced the lower dynamism of the balance of the current credit portfolio granted by commercial banks to the SPNF (8.2% YoY in real terms) and the balance of traditional bank deposits (6.1% YoY in real terms).

While directionally consistent with our expectations, the SEP adjustments (higher inflation, weaker growth, and a slightly higher unemployment rate) were not sufficient to alter the median fed funds rate projection for end-2025, which remains at 3.9% (two cuts).

While signals on how the Fed now assesses the evolution of risks to its goals will draw significant attention, all eyes will be on the dot plot to see whether a majority still favors at least one rate cut this year.

At its June meeting, the Central Bank’s Board decided to keep the policy rate unchanged at 4.50%. The monetary policy stance, measured by the ex-ante real reference rate, remains around neutral.