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MEXICO: CIBC Expects Banxico To Maintain 25bp Cutting Pace In Short-Term

MEXICO
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  • CIBC notes that Banxico’s forward guidance hinted that the easing cycle would continue, but in their view, it showed no commitment to a specific magnitude or speed of rate cuts. They believe it is clear that the deterioration of the economic outlook has gained relevance among the majority of the board and that this situation is unlikely to change for the remainder of 2024.
    • Moreover, although recognising the volatile environment for the MXN, board members have continuously reiterated the small FX passthrough to prices.
    • This supports a continuous easing cycle throughout 2025 but, given still unanchored long-term inflation expectations and high core services CPI, only at a pace of 25bps in the short term.
    • CIBC’s base case considers another 50bp of rate cuts to 10.0% in Q4 and 225bp throughout next year to 7.75%.
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  • CIBC notes that Banxico’s forward guidance hinted that the easing cycle would continue, but in their view, it showed no commitment to a specific magnitude or speed of rate cuts. They believe it is clear that the deterioration of the economic outlook has gained relevance among the majority of the board and that this situation is unlikely to change for the remainder of 2024.
    • Moreover, although recognising the volatile environment for the MXN, board members have continuously reiterated the small FX passthrough to prices.
    • This supports a continuous easing cycle throughout 2025 but, given still unanchored long-term inflation expectations and high core services CPI, only at a pace of 25bps in the short term.
    • CIBC’s base case considers another 50bp of rate cuts to 10.0% in Q4 and 225bp throughout next year to 7.75%.