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MEXICO: Banorte Expecting Same 25BP Magnitude Cut in February

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Following today’s inflation data release, Banorte believe Banxico will continue easing, forecasting a 25bp rate cut on Feb 06. Banorte continue to believe that the downward path of inflation will remain as the main driver for Banxico to proceed with additional cuts to the reference rate.
  • In addition, expectations of an economic slowdown in 2025 will also weigh on the reaction function. Nevertheless, the external environment remains a high source of uncertainty, with the threat from the US that 25% tariffs will be imposed on imports from Mexico as early as Feb 01.
  • Therefore, Banorte don’t see the committee accelerating the easing pace at this juncture, but do note the market is more sanguine, already pricing a 50bps cut with a high probability.
  • After the February decision, Banorte anticipate adjustments of both -25bps and -50bps in subsequent decisions, followed by a pause in the second half of the year. The year-end rate forecast stands at 8.50%.
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  • Following today’s inflation data release, Banorte believe Banxico will continue easing, forecasting a 25bp rate cut on Feb 06. Banorte continue to believe that the downward path of inflation will remain as the main driver for Banxico to proceed with additional cuts to the reference rate.
  • In addition, expectations of an economic slowdown in 2025 will also weigh on the reaction function. Nevertheless, the external environment remains a high source of uncertainty, with the threat from the US that 25% tariffs will be imposed on imports from Mexico as early as Feb 01.
  • Therefore, Banorte don’t see the committee accelerating the easing pace at this juncture, but do note the market is more sanguine, already pricing a 50bps cut with a high probability.
  • After the February decision, Banorte anticipate adjustments of both -25bps and -50bps in subsequent decisions, followed by a pause in the second half of the year. The year-end rate forecast stands at 8.50%.