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Goldman Sachs Foresee Maintenance Of Vigilant/Conservative Forward Guidance

MEXICO
  • Goldman Sachs believe that given the recent domestic and external macro-financial developments, the policy signals and balance of views in the Jun 1 minutes, they expect the MPC to hold the policy rate unchanged at 11.25%.
  • GS foresee the maintenance of vigilant/conservative forward guidance in line with that of the last meeting (May) when the MPC stated that although the economy has entered a disinflation stage it anticipates a complex and uncertain inflation outlook over the entire forecast horizon, with upward risks, and that in order to achieve an orderly and sustained convergence of headline inflation to the 3% target, it considers that “it will be necessary to maintain the policy rate at its current level for an extended period”.
  • Goldman Sachs expect the post meeting policy statement to acknowledge that the policy rate is currently at a significantly restrictive level and that the main mechanisms of transmission are working well. They also expect the statement to acknowledge that domestic economic activity has shown resilience in a complex external environment (grew by more than expected in 1Q2023) and that the labor market remains strong.
  • GS also expect the statement to acknowledge that since the last MPC policy meeting, annual headline and core inflation continued to moderate, with the moderation in core driven by goods given the stickiness/persistence of services inflation. Finally, the statement will underscore the median headline inflation expectations for 2023-34 improved marginally, while for core worsened by a small amount.
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