MXN: A case for a further 25 basis point cut – Commerzbank
26.09.2024, 11:40

MXN: A case for a further 25 basis point cut – Commerzbank

The Bank of Mexico (Banxico) will hold its regular meeting this evening (European time). At the moment, all signs point to another 25bp cut to 10.5%. This is supported by the fact that Banxico, with its last rate cut in early August, has already made it clear that the focus of policymakers has changed in recent months. The focus is now much more on the weakening real economy, while inflation, which remains very stubborn, seems to be taking a back seat, Commerzbank’s FX analyst Michael Pfister notes.

Banxico is likely to cut rates by 25bp today

“This is also supported by the fact that Banxico went ahead with the rate cut even though the Mexican peso has depreciated significantly in recent weeks, pointing to stronger imported inflationary pressures in the coming months. Recent statements from officials also leave little doubt that they will continue their monetary easing today.”

“With real interest rates still quite high and other central banks considering increasing the pace of quantitative easing, one might wonder whether Banxico will also start cutting rates by 50 basis points. However, this seems unlikely, at least for the time being.”

“The reasons for this are the aforementioned stubborn inflation, but also the fact that the data from the real economy, while pointing to a slowdown, do not point to a significant economic downturn. In short, Banxico is likely to cut rates by another 25 basis points today.”

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