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MEXICO: Scotiabank Maintains 25bp November Rate Cut Call

MEXICO
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  • Scotiabank still expects a cut by Banxico in November, despite headline and core inflation rising more than expected in the first half of October. The greater-than-expected rebound generates uncertainty about the trajectory of inflation, since internal demand has not fallen enough, and goods and services prices are falling slowly, due to effects of natural phenomena, which contributes to volatility in agricultural prices. Despite this, Scotiabank maintains the call for a 25bp cut to 10.25% on Nov 14.
  • Scotiabank says that it stands out that core inflation remains almost at the same level as the last two weeks of September, as a result of slight declines in merchandise (2.89% y/y) and services inflation (5.03% y/y). On the other hand, non-core inflation rose to 7.17% y/y, from 6.28%, highlighting agriculture prices, which rose by 9.66% y/y.
  • They also note that wholesale and retail sales in August point to greater weakness in consumption. The persistent decline in wholesale sales could anticipate more weakness in consumption ahead, given that the wholesale sector is an early indicator of demand in the supply chain. Consumption may also be affected by increased pessimism among investors and a certain degree of risk aversion in an uncertain environment.
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  • Scotiabank still expects a cut by Banxico in November, despite headline and core inflation rising more than expected in the first half of October. The greater-than-expected rebound generates uncertainty about the trajectory of inflation, since internal demand has not fallen enough, and goods and services prices are falling slowly, due to effects of natural phenomena, which contributes to volatility in agricultural prices. Despite this, Scotiabank maintains the call for a 25bp cut to 10.25% on Nov 14.
  • Scotiabank says that it stands out that core inflation remains almost at the same level as the last two weeks of September, as a result of slight declines in merchandise (2.89% y/y) and services inflation (5.03% y/y). On the other hand, non-core inflation rose to 7.17% y/y, from 6.28%, highlighting agriculture prices, which rose by 9.66% y/y.
  • They also note that wholesale and retail sales in August point to greater weakness in consumption. The persistent decline in wholesale sales could anticipate more weakness in consumption ahead, given that the wholesale sector is an early indicator of demand in the supply chain. Consumption may also be affected by increased pessimism among investors and a certain degree of risk aversion in an uncertain environment.