As expected, Banxico cut the interest rate again by 50-bps to 9.0% in a unanimous decision. In addition, the new forward guidance signaled another 50-bps cut in the following meeting “looking ahead it could continue calibrating the monetary policy stance and consider adjusting it in a similar magnitude”. The one-year real ex-ante rate of 4.9% remains above Banxico’s real neutral estimate of 2.7%.
Banxico’s inflation forecast path remained unchanged from the previous meeting, with a convergence to the target expected by 3Q26. The statement noted that the balance of risks for inflation still leaned towards the upside, but “it has improved”.
Regarding the discussion on tariffs, the board continued to mention that announcements of economic policy by the new US administration have added uncertainty to the forecasts. The effects could imply both upside and downside inflationary pressures.
Our take: Today’s decision delivered a 50-bp cut, followed by forward guidance indicating a similar adjustment in the next meeting (May 15th). Although the decision was broadly expected by analysts, signaling the next move in such a clear form was not the consensus. Given the well-behaved USDMXN, CPI within Banxico’s target and weak economic data (we forecast a 0.5% QoQ GDP contraction in 1Q25, indicating a technical recession following the 0.6% decline in 4Q24), we see no obstacle to the delivery of another 50-bp cut at the May meeting. We’ll learn more about the board’s thinking with the release of the minutes on April 10.