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MEXICO: JP Morgan Forecasting Banxico Pause Next Week

MEXICO
EM BulletMexicoBulletGlobalEmerging Market NewsRegion
  • JP Morgan is now expecting Banxico to adopt a more cautious approach and take a breather next week in order to better understand the different layers of risks. While JPM expect Banxico to ease toward a still-restrictive stance next year, additional pass-through risks to inflation are likely to emerge sooner rather than later.
  • They now forecast only 25bps cuts, with some intermittency, reaching 9% next year, with MXN switching, as they have warned, to a new weaker equilibrium required to stabilize the economy, between 20.00-21.00 throughout 2025.
  • To this latter point, with growth expected to modestly expand in 2025, and the risk of a recession clearly increasing, JPM believe policy-makers could play a balancing act between interest rates and FX measures, but they do not eye hasty interventions any time soon.
  • JPM note the main challenge could be more evident on the fiscal front and the 2025 budget as the MoF could face a double whammy of lower growth and higher interest rates, with both shocks exerting further pressure to an already-challenging deficit target.
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  • JP Morgan is now expecting Banxico to adopt a more cautious approach and take a breather next week in order to better understand the different layers of risks. While JPM expect Banxico to ease toward a still-restrictive stance next year, additional pass-through risks to inflation are likely to emerge sooner rather than later.
  • They now forecast only 25bps cuts, with some intermittency, reaching 9% next year, with MXN switching, as they have warned, to a new weaker equilibrium required to stabilize the economy, between 20.00-21.00 throughout 2025.
  • To this latter point, with growth expected to modestly expand in 2025, and the risk of a recession clearly increasing, JPM believe policy-makers could play a balancing act between interest rates and FX measures, but they do not eye hasty interventions any time soon.
  • JPM note the main challenge could be more evident on the fiscal front and the 2025 budget as the MoF could face a double whammy of lower growth and higher interest rates, with both shocks exerting further pressure to an already-challenging deficit target.