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MEXICO: Goldman Sachs See 50bp Rate Cut, With Possibly One Dissenting Vote

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Goldman Sachs expects Banxico to cut the policy rate by 50bp to 9.50% this week, with possibly one dissenting vote for a smaller cut. This is contingent on tariff developments and the market reaction and MXN performance ahead of the meeting. MXN pressure before Thursday could move the needle to a more defensive 25bp cut, or at the extreme no cut.
  • GS’ call is based on the significant weakening of real activity during 4Q24, dimmed outlook for growth in 2025, decline of headline inflation within the upper-half of the inflation target band, slight moderation of services inflation and still high ex-ante real rate.
  • In addition, GS notes that the January 9 MPC minutes showed that three directors were open to entertain accelerating the pace of rate cuts. GS expects the forward guidance to remain data dependent.
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  • Goldman Sachs expects Banxico to cut the policy rate by 50bp to 9.50% this week, with possibly one dissenting vote for a smaller cut. This is contingent on tariff developments and the market reaction and MXN performance ahead of the meeting. MXN pressure before Thursday could move the needle to a more defensive 25bp cut, or at the extreme no cut.
  • GS’ call is based on the significant weakening of real activity during 4Q24, dimmed outlook for growth in 2025, decline of headline inflation within the upper-half of the inflation target band, slight moderation of services inflation and still high ex-ante real rate.
  • In addition, GS notes that the January 9 MPC minutes showed that three directors were open to entertain accelerating the pace of rate cuts. GS expects the forward guidance to remain data dependent.