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MEXICO: Banorte Expects 50bp Cut This Week, 8.50% Year-End rate

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Banorte expects Banxico to cut its reference rate by 50bp to 9.50% on Thursday, which would be the first 50bp reduction since August 2020. Their estimate is mainly based on recent communications from the institution. In this regard, the Monetary Policy Program for 2025 stated that the Board would consider larger reductions in the reference rate as early as the first meetings of the year. This was echoed by Governor Victoria Rodríguez in a recent interview.
  • In this sense, the performance of inflation and risks of a more protracted economic slowdown will be key for the cut. However, external risks remain, which could prompt a smaller adjustment in an adverse scenario.
  • The tone of the statement is likely to remain dovish, suggesting that adjustments will continue in subsequent meetings. Banorte still sees 150bp of cuts this year, as inflation and economic conditions will continue to warrant a substantial reduction, especially when considering the current degree of monetary tightening. Thus, Banorte reaffirms their year-end forecast of 8.50%.
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  • Banorte expects Banxico to cut its reference rate by 50bp to 9.50% on Thursday, which would be the first 50bp reduction since August 2020. Their estimate is mainly based on recent communications from the institution. In this regard, the Monetary Policy Program for 2025 stated that the Board would consider larger reductions in the reference rate as early as the first meetings of the year. This was echoed by Governor Victoria Rodríguez in a recent interview.
  • In this sense, the performance of inflation and risks of a more protracted economic slowdown will be key for the cut. However, external risks remain, which could prompt a smaller adjustment in an adverse scenario.
  • The tone of the statement is likely to remain dovish, suggesting that adjustments will continue in subsequent meetings. Banorte still sees 150bp of cuts this year, as inflation and economic conditions will continue to warrant a substantial reduction, especially when considering the current degree of monetary tightening. Thus, Banorte reaffirms their year-end forecast of 8.50%.