Banxico Review

A Review of last night's meeting:

• Banxico left the overnight rate unchanged at 4.25% as expected. The committee reiterated the pause provides room to confirm CPI moving to target.
• What was a surprise was the 3/2 split on the vote compared to the 4/1 split in November. This can certainly be considered as dovish given the fact 40% of the committee consider the pause in the easing cycle to not be appropriate and would have preferred a 25bps cut.
• Especially given the departure of the relatively hawkish Guzman, the likelihood of a cut in February has certainly increased.

*SELL-SIDE REVIEWS

• TD - Now forecast Banxico to resume easing, beginning with a 25bp cut to the policy rate at the February meeting, followed by a further 25bp cut at the March meeting.
• JPMorgan - All in all, we now believe Banxico will resume cuts as soon as February instead of March. Furthermore, we think the board will proceed thereafter with back-to-back cuts to bring the policy rate to 3.5% by May.
• GS - A moderation of core inflation prints leading to a noticeable deceleration of the annual rate should be followed in short order by the resumption of rate cuts. They believe that there is a significant probability that the MPC resumes the easing cycle in 1Q2021.