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QIR Confirms Banxico Considering Rate Cuts At Coming Meetings

MEXICO
  • In yesterday’s quarterly inflation report, Banxico reduced its 2024 GDP growth forecast to 2.8%, from 3.0% previously, while keeping its 2025 GDP forecast at 1.5%. Inflation forecasts were unchanged from those included at the Feb 8 MPC meeting, showing a convergence to target by Q225. Following the QIR, Goldman Sachs continue to expect a 25bp rate cut in March and a year-end rate of 9.0%, while HSBC also believe that the case to start cutting rates in March is gaining traction, with incoming data including H2 Feb CPI remaining key.
  • During the QIR presentation, Governor Rodriguez said that Banxico is actively considering interest rate cuts at coming meetings, but didn’t explicitly commit to March, noting that there was still time between now and then. The Board will consider progress made on inflation and remaining risks. Hawkish board members Espinosa and Heath remain more cautious, noting upside risks to inflation, with Heath adding that it would be a mistake to cut too soon. USDMXN remains in consolidation mode for now and within its recent range, with 1-month implied vol still around its lowest since early 2020, at 7.96%.
  • On the data front today, January unemployment will be released at 1200GMT(0700ET), with analysts expecting a slight increase to 2.8%, from 2.61% prior. Net outstanding loans for January will also cross at 1500GMT(1000ET).
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