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Banxico Still Expected To Stay On Hold After April CPI Data

MEXICO
  • April CPI inflation data came in close to expectations, with the headline rate surprising marginally to the upside, but core printing just below consensus forecasts. Services inflation came in at +0.10% m/m, with the annual rate moderating to 5.21% y/y. However, services ex. education and housing inflation is still tracking at 6.19% y/y. Core goods inflation eased another 21bp to 3.67% y/y.
  • Goldman Sachs still see near-term upside risk to inflation, particularly services. They note that services inflation has been stuck in a 5.2-5.4% range since April-23. In their view, recent FX and rate developments and today’s CPI data do not provide Banxico with enough comfort to cut the policy rate at today’s meeting.
  • Meanwhile, Pantheon note that core disinflation remains fully on track, due to a softening economic recovery and tight financial conditions. However, they believe that higher food prices are now a problem due to adverse weather conditions. In their view, this will give the most hawkish members of Banxico’s Board further reasons to keep interest rates on hold later.
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