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Free AccessItaú Raise Year-End Policy Rate Forecast To 9.75%
- Ahead of the June Presidential election, Itaú note the strength of fiscal spending, which reflects a front-loading of social programs and fixed capital expenditure. Despite this, as well as resilient activity in the US, monthly GDP for Mexico at the beginning of the year has been weak. Itaú’s 2024 GDP growth forecast of 2.8% has a downside bias.
- Meanwhile, Itaú note that Banxico’s forward guidance suggests that further rate cuts will be data dependent. Although further declines in core inflation amid soft activity at the beginning of the year support the continuation of the easing cycle in May, they have changed their call for a pause next month, given Fed repricing pointing to a delay in the beginning of the US easing cycle. Their end of year policy rate forecast now stands at 9.75% (vs. 9.50% previously).
- Itaú have also reduced their end-of-year 2024 USDMXN forecast to 17.9 (previously 18.2), given a stronger-than-expected evolution of the peso and despite the strengthening of the USD globally. On the fiscal front, they have increased their 2024 deficit estimate to 5.0% of GDP (from 4.9%), given the strong fiscal-expenditure execution at the beginning of the year. They have also raised their 2025 deficit forecast to 2.5% of GDP (from 2.2%), in line with the new MoF estimates.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.