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Barclays Expects Unanimous Decision To Hold Rates, No More Cuts Until 2025

MEXICO
  • Barclays anticipates that Banxico will unanimously vote to leave the rate unchanged at 11.00%. Even though the inflationary outlook has been favourable enough for the central bank to continue to cut rates, Barclays believes the recent USDMXN volatility will make the board to be more cautious, particularly as the exchange rate is the main channel of transmission of monetary policy in Mexico.
  • In fact, some board members have emphasised this in recent speeches. Political noise coming from President López-Obrador’s push to a series of market unfriendly reforms, including an overhaul of the judiciary system, will probably continue to foster a volatile environment for local markets and the currency.
  • In Barclays view, this will preclude Banxico from resuming its easing cycle until 2025. However, the balance of risks is tilted towards a cut before year-end if FX volatility reduces, easing its potential pass-through effects on inflation. Overall, Barclays continues to project the reference rate at 11.00% by YE24, and 10.00% by YE25.
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