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MEXICO: Itaú Says Banxico Minutes Signal Continuous Cuts

MEXICO
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  • Itaú says the Banxico minutes are consistent with their view of the central bank implementing continuous policy rate cuts ahead. Their base scenario is for Banxico to cut the policy rate by 25bp in each of the remaining meetings of the year, reaching 10.0% at year-end. The continuity of deputy governor Heath’s dissident vote should depend on the persistence of core services inflation.
  • Aside from Heath, Itaú notes that the majority of the board appears ready to continue cutting, as two members expressed willingness to discuss larger cuts. One member stated that the evolution of the inflationary and activity outlooks would allow for further rate cuts, with the level of core inflation allowing for an assessment of the size. Another member argued for a more cautious approach due to various risks and still elevated services inflation.
  • Itaú notes that a third member mentioned that the inflation outlook was consistent with cuts, as fundamentals still allowed for inflation to converge to target, while a fourth member explicitly mentioned that the inflationary outlook allowed for continuous adjustments, even for a discussion on the size of rate cuts.
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  • Itaú says the Banxico minutes are consistent with their view of the central bank implementing continuous policy rate cuts ahead. Their base scenario is for Banxico to cut the policy rate by 25bp in each of the remaining meetings of the year, reaching 10.0% at year-end. The continuity of deputy governor Heath’s dissident vote should depend on the persistence of core services inflation.
  • Aside from Heath, Itaú notes that the majority of the board appears ready to continue cutting, as two members expressed willingness to discuss larger cuts. One member stated that the evolution of the inflationary and activity outlooks would allow for further rate cuts, with the level of core inflation allowing for an assessment of the size. Another member argued for a more cautious approach due to various risks and still elevated services inflation.
  • Itaú notes that a third member mentioned that the inflation outlook was consistent with cuts, as fundamentals still allowed for inflation to converge to target, while a fourth member explicitly mentioned that the inflationary outlook allowed for continuous adjustments, even for a discussion on the size of rate cuts.