Mexico | It is a close call but we expect Banxico to cut the policy rate 25bp to 4.00%

Summary

With a backward-looking central bank, rising headline inflation makes consecutive rate cuts less likely, but the door for additional cuts should open again in late 2Q.

Key points

• Key points:
• Core inflation is set to weaken from 2Q onwards
• The near-term economic outlook is darkening and demand is set to remain weak in the foreseeable future
• Recent increases in inflation are mainly explained by rises in global energy prices
• The balance of the Board appears to have shifted to the doves
• We think that the policy rate will reach 3.50% this year but it could by 3Q instead of 2Q

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