BANXICO - Sell-Side Analyst Views

BANXICO - Sell-side Analyst Views

18/22 Surveyed Analysts Expect a Hold at 4.25% with four calling for a cut of 25 bps to 4.00%.

JPM – Expect a hold - one month's data likely insufficient to resume cuts. Sizeable probability of Feb cut (previously forecast March cut) – with inflation trends warranting 75bps of cuts before midyear 2021. Acknowledge timing remains tricky given consumer price swings, but given expectations of protracted recovery, confident of call for further cuts. Further acknowledge potential dovish shift from committee change.

SocGen – See 25 bps cut to 4.00% citing meaningful decline in core inflation in November, providing additional room to ease. See additional significant easing in 2021. Expect the overnight rate to bottom at 3.0% in 3Q'21. Core inflation still elevated vs target but should retract given appreciating MXN and large degree of slack in product and labour markets. Risk is delayed easing over less easing.

GS - Expect the MPC to hold at 4.25%, likely in a 4-1 split. Degree of confidence in call not high – assigns 40% probability of a cut, citing better than expected Nov inflation prints, weak credit/lending dynamics and strong MXN. Slightly in favour of hold as resumption of cuts on one set of data may be premature. The conservative/hawkish majority of the MPC may see significant option value in waiting a bit longer in order to have a better grasp on whether inflation is indeed converging to the target.

However, they continue to expect the MPC to resume the easing cycle in 1H2021, driving the policy rate down to the 3.50%-3.75% handle.

TD – Expect rates on hold at 4.25%, with messaging consistent with tone of Nov meeting. Uncertainty regarding the new incoming Banxico board member, justified a hold in Nov, despite the obvious downside momentum evolving in inflation, following the July peak. Borja replacement well digested by markets and opens door to further easing in 2021, however, expect more than single meeting hold to affirm policy credibility.