Mexico: Central bank to cut its policy rate by 50bp on Thursday

The Bank of Mexico will have its Board meeting on Thursday. Market consensus point to a 50bp rate cut to 4.50%. Economist at BBVA Research also see such a rate cut and consider Banxico will keep cutting rates in each of the remaining meetings during 2020 to 3.00%.

Key Quotes:

“Following four consecutive 50bp rate cuts, some start to think that Banxico should not press ahead with its easing cycle. We do not share that view. A handful of analysts think that Banxico will not cut its policy rate further (two out of 28 in the latest CitiBanamex survey) due to inflation concerns. Some others think that the chances of a 25bp rather than 50bp cut have increased (six out of 28 expect only a 25bp rate cut). Yet, most share our view that the monetary policy stance should be eased further and Banxico will cut its policy rate by 50bp to 4.50% at its meeting on Thursday (20 out of 28). That is, an additional 50bp cut is expected and a smaller cut would be surprising.”

“Forward guidance is unlikely but we expect Banxico to remain dovish and to brush aside the recent temporary and supply-driven inflation increase.”

“We continue to expect multiple 50bp rate cuts going forward and a more appropriate and looser monetary policy stance by year-end as long as the peso continues to hold up. We continue to anticipate four more 50bp rate cuts in the second half of the year (200bp of rate cuts), which is four times what consensus is currently expecting (50bp) and much more than the view currently priced in by markets (75bp). Risks are tilted to less easing but we think that Banxico has plenty of space to cut rates.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.