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Finamex Expect Banxico To Maintain Hawkish Bias

MEXICO
  • Finamex believe the table is set for Banxico to maintain its hawkish bias. Finamex’s focus will lie on possible changes to its inflation projections, whose relatively optimistic path for 2024 underlies Banxico’s reluctance to change the upward tilt of its balance of risk for inflation, in their view. Importantly, a change in the latter is the first step they need to see before Banxico can change its scope of ultra-restrictive monetary policy.
  • As Finamex previously noted, it should not go unnoticed that new time series for the country’s national accounts are now available. Not only did the new official data improve the growth picture in the past few years but it also had an impact on the calculation of the output gap and the prospects of slack conditions in the forecast horizon.
  • In their current baseline scenario, the reference rate will remain on hold at 11.25% for the rest of the year. During the first half of 2024, Finamex anticipate a gradual pace of rate cuts beginning February that prevails throughout the first half of the year, and a larger 50-basis-point set of rate cuts in the back half of the year. The policy path they have pencilled entails a 2024 year-end level of 8.25%. They will be reassessing this trajectory as they learn about Banxico’s reaction to the latest Fed’s actions.
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