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JPMorgan Continue To See Rates At 10.75% in Q1’23

MEXICO
  • JPMorgan identified some hints of neutrality beyond the 50bps vote from Deputy Governor Esquivel, but overall, the main message of the statement was hawkish.
  • The communiqué was quite similar to September’s in terms of the balance of risks to growth and inflation, but given the board underscored that “some [inflation] shocks are moderating,” presumably referring to the easing pressures in some consumer price categories like processed foods and services, there were indeed some hints that inflation dynamics are starting to improve — albeit gradually.
  • Markets will only learn more from the motivations of the board (and the dissenter) in the minutes — out in two weeks. But recent developments, particularly on inflation in both Mexico and the US, and MXN dynamics, suggest going forward there will be a transition toward a neutral stance considering that real exante rates continue to grind higher, and monetary conditions are also tightening further.
  • JPM continue to see rates at 10.75% by 1Q23 even if they recently revised down their inflation path, similar to what Banxico did this week for its year-end forecast. At this point, JPM still see a 50bp hike in December, followed by a final 25bps in February. They expect to read more details of the exit strategy soon, and hopefully in the minutes discussion on November 24.
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