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MEXICO: Gradual Disinflation Allows Easing Cycle To Continue

MEXICO
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  • The decline in headline inflation to 4.58% y/y in September brought the annual rate to its lowest level since March. Meanwhile, the moderation in core inflation to 3.91% y/y was driven by the decline in core goods inflation, as core services inflation remained sticky.
  • Itaú continues to expect the gradual disinflationary process to continue in the short-term. Survey-based inflation expectations at the one-year horizon have also edged lower, especially core, consistent with persistent downside revisions to activity. Itaú expects Banxico to continue cutting at a 25bp pace in the next MPC meeting and sees inflation ending the year at 4.3%, essentially in line with Banxico’s 4.4% Q4 average.
  • With oil prices remaining soft and Energy Minister González saying that the proposed energy reform would give the government more control of Pemex and CFE, the peso has underperformed today. USDMXN has risen by 0.6% towards 19.48. First resistance is at 19.8295, the Oct 1 high, while key support to watch lies at 19.2469, the 50-day EMA.
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  • The decline in headline inflation to 4.58% y/y in September brought the annual rate to its lowest level since March. Meanwhile, the moderation in core inflation to 3.91% y/y was driven by the decline in core goods inflation, as core services inflation remained sticky.
  • Itaú continues to expect the gradual disinflationary process to continue in the short-term. Survey-based inflation expectations at the one-year horizon have also edged lower, especially core, consistent with persistent downside revisions to activity. Itaú expects Banxico to continue cutting at a 25bp pace in the next MPC meeting and sees inflation ending the year at 4.3%, essentially in line with Banxico’s 4.4% Q4 average.
  • With oil prices remaining soft and Energy Minister González saying that the proposed energy reform would give the government more control of Pemex and CFE, the peso has underperformed today. USDMXN has risen by 0.6% towards 19.48. First resistance is at 19.8295, the Oct 1 high, while key support to watch lies at 19.2469, the 50-day EMA.