​MNI Banxico Preview - Dec 2023: Looking For Signals On Easing Timeline

Executive Summary

• Close to all analysts are expecting Banxico to keep the overnight rate unchanged at 11.25%.
• This would be in line with the current guidance from the committee that “the reference rate must be maintained at its current level for some time” in order to achieve a convergence of inflation to the 3% target.
• However, given the improving core inflation data and the most recent communication from multiple board members, markets will analyse this month’s statement for further clues on when easing could be initiated in 2024.

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MNI Banxico Preview - December 2023.pdf

Committee Members Open To Easing Discussions in First Quarter of 2024

In its latest quarterly inflation report, central bank commentary in the press conference has prompted some speculation surrounding the potential for monetary easing to begin sooner than markets had been expecting.

Governor Rodriguez, along with deputy governors Heath and Mejia all said that a rate cut in Q1 could be discussed. “I see a possibility that at the start of the meetings next year we put on the table the start of discussions on a rate cut,” the Governor said. “We’ve come a long way and that has allowed us to change the forward guidance.” The comments were broadly in line with prior comments from Heath who earlier that week said that if inflation continues to drop, especially core inflation, an 'adjustment' to interest rate could come by February or March.

As a reminder back in November, and to reiterate the unlikelihood of any action this week, Deputy Governor Jonathan Heath has previously been vocal that the central bank has no intention of altering policy in 2023. “We say we are not going to move for an extended period of time. We’re basically saying we are not going to move it in November or December,” Heath said. However, any further adjustments to the statement may stoke easing bets for the first meeting in 2024, which is scheduled for February 08.