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JPMorgan See Balanced Risks Regarding Easing Timeline In 2024

MEXICO
  • There haven’t been any unpleasant surprises that could derail the intentions to start relaxing the tight policy stance as soon as in 1Q24, according to JPMorgan, who continue to expect the first cut in March but acknowledge that there are balanced risks for the first action to take place either in February, or in May.
  • JPM expect the board to acknowledge once again the progress made on the disinflation process and with a special emphasis on the improvement in expectations. Of note, long term expectations declined to its lowest level in almost two years and core goods continue to deliver better news even in the context of demand-side pressures. Similarly, November inflation released last week surprised to the downside with core goods inflation also providing some relief. This would suggest the case for a February cut is compelling.
  • On the other side of the ledger there are some concerns that should prevent an outright improvement in the message from the Board on the balance of risks to inflation, particularly considering the recent dissenting tone from one member. On the one hand, wage dynamics remain stubborn, with the private sector increasing salaries by nearly 10%oya last month, more than twice 12m inflation expectations. While the 20% min wage increment was expected, it confirms the bias towards an aggressive wage policy that could last longer, and with long-lasting consequences for core services dynamics.
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