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Barclays Say Focus On The Communiqué, Particularly On Forward Guidance

MEXICO
  • Barclays expect Banxico unanimously to keep the rate unchanged at 11.25%. This is now widely expected and was reinforced in the recent meeting minutes, as well as the monetary authority’s Quarterly Report.
  • As a result, focus will be on the communiqué, particularly on forward guidance. In Barclays view, the board is highly likely to keep the sentence “It considers that it will be necessary to maintain the reference rate at its current level for an extended period.” As a result, Barclays expect no major change in expectations.
  • If the board decides to incorporate conditions for cuts such as the ones mentioned in the meeting minutes – an ex-ante real rate of 7.00-7.50% or the contribution of the main inflation components going back to pre-pandemic levels – then Barclays believe market participants would take it as a dovish statement because it would be explicitly opening the door for rate cuts.
  • Nevertheless, in the meeting minutes, only two of the five board members explicitly discussed rate cuts, so this might not be the overall board’s opinion yet. All in all, Barclays continue to believe that Banxico will not cut rates until February 2024, towards 7.50% by year-end.
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