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MEXICO: Deutsche Bank Continue to Expect 100BP of Further Cuts This Year

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Deutsche Bank continue to expect an additional 100bp in cuts for this year, delivered via a 50bp cut in March and 25bp cuts in May and June. DB believe that the upcoming trade report to be submitted to Pres. Trump on April 1 could lead to tighter global financial conditions, thereby undermining the space for Banxico to maintain the pace of the easing cycle at 50bp/meeting.
  • However, Deutsche do note that Banxico’s dovish bias suggests that if said report turns out to be inconsequential, the easing cycle will likely continue at a similar pace.
  • DB notes that if the Fed validates the bank’s expectation of no cuts throughout 2025, the room for Banxico to further reduce the policy rate beyond the additional 100bp would be limited, notwithstanding the leeway to continue cutting afforded by domestic economic conditions—as captured by their Taylor Rule estimates.
  • Thus, DB see a prolonged pause after the June cut that may extend into next year.
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  • Deutsche Bank continue to expect an additional 100bp in cuts for this year, delivered via a 50bp cut in March and 25bp cuts in May and June. DB believe that the upcoming trade report to be submitted to Pres. Trump on April 1 could lead to tighter global financial conditions, thereby undermining the space for Banxico to maintain the pace of the easing cycle at 50bp/meeting.
  • However, Deutsche do note that Banxico’s dovish bias suggests that if said report turns out to be inconsequential, the easing cycle will likely continue at a similar pace.
  • DB notes that if the Fed validates the bank’s expectation of no cuts throughout 2025, the room for Banxico to further reduce the policy rate beyond the additional 100bp would be limited, notwithstanding the leeway to continue cutting afforded by domestic economic conditions—as captured by their Taylor Rule estimates.
  • Thus, DB see a prolonged pause after the June cut that may extend into next year.