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MEXICO: Consensus Looks for 25BP Banxico Cut in November

MEXICO
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  • JP Morgan believes “gradual cuts are expected to thrive on the way toward less monetary astringency – the majority’s most compelling argument.” JPM remain comfortable that the path of steady and cautious 25bp rate cuts in the last two meetings of this year remains the most likely one, and they acknowledge the risk for 50bp cuts was not gone, only postponed.
  • BBVA say the minutes highlight that there is enough support within the Board for the easing cycle to continue at a gradual pace with 25bp cuts. In BBVA’s view, MXN volatility will rise in the coming weeks amid both domestic and external uncertainty, which could drive the USDMXN above 20.0, however, the pair could stabilise at lower levels at year-end, depending on the outcome of the US election.
  • HSBCthink the path of least resistance is still a pace of 25bps rate cuts ahead, but, as we have indicated previously, with dominating risks of an eventual acceleration that could be related to further disinflation progress, slower-than-expected growth and further rate cuts in the US. HSBC’s end-2024 and end-2025 policy rate forecasts remain at 10.0% and 8.0%, respectively.
  • Goldman Sachs: The bar to accelerate the pace of cuts to 50bp is not high given the weak growth dynamics, progress on the disinflation front, and still very high real policy rate, but with the FOMC expected to deliver a 25bp cut at the Nov meeting and the potential impact on risk sentiment and the MXN of the US election, Banxico may opt to defer the decision to deliver deeper cuts to December, or later.
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  • JP Morgan believes “gradual cuts are expected to thrive on the way toward less monetary astringency – the majority’s most compelling argument.” JPM remain comfortable that the path of steady and cautious 25bp rate cuts in the last two meetings of this year remains the most likely one, and they acknowledge the risk for 50bp cuts was not gone, only postponed.
  • BBVA say the minutes highlight that there is enough support within the Board for the easing cycle to continue at a gradual pace with 25bp cuts. In BBVA’s view, MXN volatility will rise in the coming weeks amid both domestic and external uncertainty, which could drive the USDMXN above 20.0, however, the pair could stabilise at lower levels at year-end, depending on the outcome of the US election.
  • HSBCthink the path of least resistance is still a pace of 25bps rate cuts ahead, but, as we have indicated previously, with dominating risks of an eventual acceleration that could be related to further disinflation progress, slower-than-expected growth and further rate cuts in the US. HSBC’s end-2024 and end-2025 policy rate forecasts remain at 10.0% and 8.0%, respectively.
  • Goldman Sachs: The bar to accelerate the pace of cuts to 50bp is not high given the weak growth dynamics, progress on the disinflation front, and still very high real policy rate, but with the FOMC expected to deliver a 25bp cut at the Nov meeting and the potential impact on risk sentiment and the MXN of the US election, Banxico may opt to defer the decision to deliver deeper cuts to December, or later.