Macroeconomic Forecast Mexico
March 2006 | Macroeconomic ForecastsIf you would like to subscribe to Mexico Monitor and gain instant access to this article, please click here to subscribe.
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Banxico cut its benchmark lending rate by 25bps to a 17-month low of 7.50% on February 24, as we had anticipated. Attention now turns to the next few Banxico meetings, at which the pace of rate cuts, or indeed, the possibility of a pause, remains the subject of debate. We maintain our stance that the bank will ease rates by a further 50bps at its next two meetings, but Banxico is unlikely to go much further. This is especially the case because, although the US Fed is hiking and the Mexican economy is recovering from a lacklustre 2005, inflation remains subdued. While headline CPI has seen a sharp upturn, from 3.33% y-o-y in December to 3.94% y-o-y in January, the opposite is occurring for core inflation, which actually fell below the 3.00% target level in January to 2.98% y-o-y, its lowest level ever. At this early stage, we are forecasting inflation of 3.6% in 2006