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MEXICO: Banorte Stick to Banxico Call, Bolder Easing Unlikely

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Banorte believe that various figures in today’s CPI report suggest that inflationary conditions continue to improve, even when considering some distortions from El Buen Fin. Banorte think conditions are in place for the monetary authority to cut the reference rate by 25bps on December 19, taking it to 10.00%.
  • It is relevant to note that comments from some Board members –namely Governor Victoria Rodriguez and Omar Mejia– have put the possibility of a 50bps cut on the table. However, Banorte believe that prevailing risks on the external front and a more hawkish view from other participants make a move of such magnitude unlikely.
  • Recent developments re the dollar consolidation and MXN positioning supports Banorte’s view of further near-term downside relief for USDMXN, targeting levels near 19.90 by year-end. However, they maintain their expectation of a USD structurally supported in 2025, projecting the USDMXN to close next year at 20.90. They expect this week’s trading range to be between 20.00 and 20.55.
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  • Banorte believe that various figures in today’s CPI report suggest that inflationary conditions continue to improve, even when considering some distortions from El Buen Fin. Banorte think conditions are in place for the monetary authority to cut the reference rate by 25bps on December 19, taking it to 10.00%.
  • It is relevant to note that comments from some Board members –namely Governor Victoria Rodriguez and Omar Mejia– have put the possibility of a 50bps cut on the table. However, Banorte believe that prevailing risks on the external front and a more hawkish view from other participants make a move of such magnitude unlikely.
  • Recent developments re the dollar consolidation and MXN positioning supports Banorte’s view of further near-term downside relief for USDMXN, targeting levels near 19.90 by year-end. However, they maintain their expectation of a USD structurally supported in 2025, projecting the USDMXN to close next year at 20.90. They expect this week’s trading range to be between 20.00 and 20.55.