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MEXICO: Natixis Sees Banxico Cutting To 8.0% This Year

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Natixis now believes that Banxico will try to lower its policy rate to around the upper bound of the neutral nominal range this year, which they estimate to be between 6.0% and 8.0%. In its forward guidance last week, the Bank indicated its intention to lower the policy rate by 50bp at the next meeting. However, the ability to continue cutting will depend on the MXN, which will be influenced by Trump's handling of tariffs. Natixis assigns probabilities of 65%, 30% and 5% to the scenarios of -50bp, -25bp and no change in rates for the March meeting.
    • Beyond that, Natixis sees another 50bp cut in May, followed by two 25bp moves in June and August, bringing the policy rate to 8.00%, where they see it staying through 2026.
    • An analysis of the policy statement related to the balance of risks to inflation and growth shows that Banxico is less concerned about inflation and more concerned about a slowdown in the pace of growth.
    • On inflation, Natixis notes that services inflation, which is important for Banxico, continues to moderate. However, the downward adjustment remains painfully slow. Overall, the downward adjustment is coming from the non-core subcomponent, while core inflation is adjusting at a slower pace.
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  • Natixis now believes that Banxico will try to lower its policy rate to around the upper bound of the neutral nominal range this year, which they estimate to be between 6.0% and 8.0%. In its forward guidance last week, the Bank indicated its intention to lower the policy rate by 50bp at the next meeting. However, the ability to continue cutting will depend on the MXN, which will be influenced by Trump's handling of tariffs. Natixis assigns probabilities of 65%, 30% and 5% to the scenarios of -50bp, -25bp and no change in rates for the March meeting.
    • Beyond that, Natixis sees another 50bp cut in May, followed by two 25bp moves in June and August, bringing the policy rate to 8.00%, where they see it staying through 2026.
    • An analysis of the policy statement related to the balance of risks to inflation and growth shows that Banxico is less concerned about inflation and more concerned about a slowdown in the pace of growth.
    • On inflation, Natixis notes that services inflation, which is important for Banxico, continues to moderate. However, the downward adjustment remains painfully slow. Overall, the downward adjustment is coming from the non-core subcomponent, while core inflation is adjusting at a slower pace.