Committee Rhetoric to Keep Focus on Vote Split, Espinosa Term Ends
Since the November meeting, Governor Rodriguez has indicated that the Banxico committee can continue to gradually moderate the level of restrictive policy. However, Rodriguez has flagged that should the inflationary outlook allow, there could be larger interest rate cuts. Additional headlines taken from a Reuters interview also leant dovish, with the Governor appearing content with the latest developments in the currency market and the markets interpretation of the latest budget proposal for 2025. Echoing this sentiment, Deputy Governor Mejia stated the cycle of adjustments could continue and its pace could be calibrated going forward.
While it is widely believed that Rodriguez and Mejia represent the most dovish wing of the committee, the chance of an acceleration in the pace of easing will still likely be met with resistance from Deputies Heath and Espinosa. Both have indicated that calibrating the magnitude and the pace of rate cuts is crucial to avoid an aggressive or premature easing before inflation is consolidated around the target. Given the committee took so long to strike a unanimous vote in November, it remains very unlikely that Heath or Espinosa would vote for bolder easing at this juncture.
