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MEXICO: JP Morgan See Material Risk for Uninterrupted Easing Cycle

MEXICO
  • Following Banxico’s QIR, JP Morgan continue to expect a 25bp cut at the next meeting and see a material risk for an uninterrupted cycle given a smoother path for inflation this year. Factoring in the recent currency adjustment, JPM have removed two cuts next year with the easing cycle expected to end at 8% by September.
  • They believe the current currency adjustment is enough to alter their 2025 inflation forecast from 3.9% to 4.2% for headline CPI and from 3.8% to 4.1%, for core.
  • The QIR was well crafted to validate the recent dovish pivot that gained traction in the June statement and was confirmed in the 25bps cut this month. The majority of members continued to emphasize the need to reduce the tight policy stance (currently at 7%) and to acknowledge the disinflation gains from the past couple of years.
  • JPM highlighted that even one of the hawkish members was clear in recognizing rate cuts are warranted if inflation declines ensue, and particularly on the core services front. But by acknowledging that the core subindex is finally below the 4% barrier, he was also yielding to further rate cuts soon.
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