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HSBC See Rates On Hold This Week, But 75bp Of Rate Cuts In H2

MEXICO
  • HSBC expect Banxico to keep the benchmark rate on hold at 11.00% this week, in line with what the market is pricing. The already blurry monetary policy outlook turned more complex after the sharp MXN depreciation that followed the election result as it poses upside risks for tradable goods prices, which combined with stronger volatility could be a gamechanger for monetary policy in the short term.
  • Against this backdrop, while HSBC think there are solid arguments to cut rates, such as the real ex-ante rate above 7% and better-than-expected core inflation, the post-election market dynamics could demand increased caution for now.
  • Assuming a pause in June, they see a resumption of rate cuts from Q3 2024, as long as the disinflation process prevails. They forecast the policy rate at 10.25% by end-2024, with one 25bp cut in Q3 and two in Q4, and 8.25% by end-2025.

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