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MEXICO: Deutsche Bank Forecasting Opportunistic 50BP Banxico Cut

MEXICO
EM BulletMexicoBulletGlobalEmerging Market NewsRegion
  • Deutsche Bank think that the additional leeway afforded by the Fed, the limited market reaction to the pipeline of constitutional reforms being adopted, and the dovish bias of the Board’s majority will likely prompt Banxico to deliver an opportunistic 50bp cut to the policy rate via a majority vote.
  • DB emphasize the opportunistic nature of the larger cut as they don’t think it would represent the new cadence of the cutting cycle.
  • Accordingly, the communiqué could bring back the message that Mexico’s relative monetary position to the US would be one factor influencing the path of monetary policy, thereby signalling that if the Fed follows a 25bp pace of cuts, then Banxico would follow suit at the same speed.
  • Deutsche look for this to be followed by consecutive 25bp cuts through next year. This path envisages the policy rate closing 2024 at 9.75% and next year at 7.75%.
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  • Deutsche Bank think that the additional leeway afforded by the Fed, the limited market reaction to the pipeline of constitutional reforms being adopted, and the dovish bias of the Board’s majority will likely prompt Banxico to deliver an opportunistic 50bp cut to the policy rate via a majority vote.
  • DB emphasize the opportunistic nature of the larger cut as they don’t think it would represent the new cadence of the cutting cycle.
  • Accordingly, the communiqué could bring back the message that Mexico’s relative monetary position to the US would be one factor influencing the path of monetary policy, thereby signalling that if the Fed follows a 25bp pace of cuts, then Banxico would follow suit at the same speed.
  • Deutsche look for this to be followed by consecutive 25bp cuts through next year. This path envisages the policy rate closing 2024 at 9.75% and next year at 7.75%.