Banxico will cut its policy rate 50bp to 4.50%

Summary

We are sticking with 50bp cuts in the policy rate in each of the 2020 remaining scheduled meetings (to 3.00%). Forward guidance is unlikely but we expect Banxico to remain dovish and to brush aside the recent temporary and supply-driven inflation increase.

Key points

• Key points:
• There is plenty of room for further easing: we continue to anticipate the policy rate to reach 3.0% by year-end
• Although risks are tilted to smaller further cuts after Thurday’s likely 50bp cut due to Banxico’s hawkishness, an easier stance will remain more appropriate and with inflation easing after the summer, Banxico will likely find no reasons to stop easing until the policy rate reaches c. 0.0% real ex-ante levels by year end

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