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MEXICO: JP Morgan Say Easing Cycle Will Not Be Linear, CIBC Expect Sep Hold

MEXICO
  • *JP Morgan continues to think additional rate cuts are coming, including a 25bp cut later this month. That said, they think today’s report raises some concerns that should not be overlooked and that validate their view that the easing cycle will not be linear (JPM call for a pause in November). Even if there are some risks that Banxico does not pause in November, decisions in 2025 will be taken one at a time.
  • *CIBC: The accumulated MXN depreciation since the start of August (over 6.0%), and elevated external (US elections) and local (constitutional reforms) risks are the main reasons for CIBC’s forecast for Banxico to hold this month. With the expected start of the Fed’s easing cycle this month, CIBC see room for tactical short USD/MXN plays into the second half of September and suggest selling USD/MXN spikes near 20.15.
  • *Banorte continue to expect a 25bps cut in September. Today’s results are consistent with an improvement in the inflation outlook. This is key for an extension of the central bank’s easing cycle. The economic outlook for the remainder of the year remains challenging, which also seems to be an important incentive for some Board members. It is Banorte’s take that this will be enough support for rate cuts to continue. However, we will be watching closely some potential risks that could prevent this from materializing, including further price shocks and the performance of some local financial assets.
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