Close panel

  • Home
  • Publications
  • Who we are
  • Big Data
  • Forecasts
    Searcher

    Published on Tuesday, March 19, 2024

    Mexico | Banxico is set to start cutting the policy rate

    Summary

    Banxico’s board had already signaled that a rate cut next week was likely. We think that is a done deal following this month’s inflation prints. We expect Banxico to cut the policy rate by 25 bps, to 11.00%. The focus will be on the signals about the upcoming rate-cut cycle.

    Key points

    • Key points:
    • Banxico has held the policy rate steady at 11.25% for the past seven meetings since its last hike in late March 2023, but the policy has become more restrictive.
    • In this period, headline inflation has decelerated by 2.4 pp, while 12-month headline inflation expectations have come down by 1 pp.
    • The real ex-ante rate has risen to 7.4% since Banxico moved to the sidelines, and is now 4 pp above the upper limit of the staff’s estimated long-run neutral range.
    • A 575 bp Mexico-US target rate spread partially explains why the Mexican peso has outperformed strongly since Banxico moved to the sidelines in mid May 2023.
    • We continue to expect Banxico to cut the policy rate at each remaining meeting in 2024 to bring it down to 9.25% by year-end, and to 7.25% by the end of next year.

    Geographies

    Topics

    Authors

    Javier Amador BBVA Research - Principal Economist
    Iván Fernández BBVA Research - Senior Economist
    Carlos Serrano BBVA Research - Chief Economist

    Documents and files

    Report (PDF)

    MX_Pre-Meeting_Banxico_Watch_March_24.pdf

    English - March 19, 2024

    New comment

    Be the first to add a comment.

    Load more

    You may also be interested in