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MEXICO: CIBC Expect 25BP Banxico Cut, Only See Larger Cuts Starting in Q2

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Following the latest developments, CIBC believe the current 25% tariff scenario will require some caution from Banxico this week. They expect the CB to only cut the overnight rate by 25bps on Thursday.
  • This is against the consensus from the Bloomberg survey, with 11/12 economists expecting a bolder 50bp cut. However, it is worth noting that these forecasts were provided last week and may not incorporate any subsequent forecast adjustments.
  • Beyond Q1, CIBC state the deterioration of the growth outlook will become the most relevant factor for Banxico as the ex-ante real rate remains significantly restrictive. Thus, CIBC do not rule out rate cuts 50bps or larger in magnitude per meeting starting in Q2.
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  • Following the latest developments, CIBC believe the current 25% tariff scenario will require some caution from Banxico this week. They expect the CB to only cut the overnight rate by 25bps on Thursday.
  • This is against the consensus from the Bloomberg survey, with 11/12 economists expecting a bolder 50bp cut. However, it is worth noting that these forecasts were provided last week and may not incorporate any subsequent forecast adjustments.
  • Beyond Q1, CIBC state the deterioration of the growth outlook will become the most relevant factor for Banxico as the ex-ante real rate remains significantly restrictive. Thus, CIBC do not rule out rate cuts 50bps or larger in magnitude per meeting starting in Q2.