Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI Banxico Preview - February 2024
Executive Summary
- The majority of analysts are expecting Banxico to keep the overnight rate unchanged at 11.25% this week, with only a few predicting a 25bp cut.
- This would be in line with the recent guidance from the committee that “the reference rate must be maintained at its current level for some time” to achieve a convergence of inflation to the 3% target.
- However, given the further decline of core inflation and signs of weakening activity, market participants will be looking for any change to the forward guidance that opens the door to a possible move in March.
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MNI Banxico Preview - February 2024.pdf
Core Inflation Extends Gradual Downtrend
Since the last policy meeting, the downward trend in core inflation has continued, with the annual rate declining to 4.78% y/y in the first half of January, from 4.98% at the end of December, supported by continued disinflation in tradable goods, which offset sticky services inflation. This further moderation in core inflation is broadly in line with Banxico’s forecasts for the first quarter of this year. At the same time, however, headline inflation for the first half of January surpassed consensus expectations by a wide margin (+0.49% m/m vs. +0.38% exp.), resulting in headline CPI picking up slightly to 4.90% y/y, from 4.86%, as non-core inflation rose to 5.24%. This suggests that headline inflation will remain above Banxico’s 4.3% estimate for the quarter, which will probably be enough to keep the central bank on hold at 11.25% again this week.
The ongoing decline in core inflation, however, does suggest that the disinflation process remains on track and may provide Banxico with enough room to soften its forward guidance on Thursday, opening the door to a potential cut at the following meeting later this quarter. Annual core inflation is now at its lowest level since Q321 and tracking below the headline rate for the first time since H1 October 2022. With consumer spending slowing, real rates rising and a still strong currency, inflation looks set to continue slowing over the coming months. The recent Banxico economist survey showed that analysts expect inflation to average 4.13% this year and 3.73% in 2025.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.