Itaú BBA - Cautious monetary easing continues

Scenario Review - Mexico

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Cautious monetary easing continues

Junho 5, 2020

Further rate cuts ahead are likely.


For the full version with all charts and tables, please open the attached pdf file

 

• The administration announced the gradual reopening of the economy, but the lack of reliable statistics to track the outbreak may end up leading to a new tightening of social distancing measures.

• The central bank of Mexico continued the easing cycle with an expected 50-bp rate cut (to 5.5%), despite higher short-term inflation forecasts. As in previous decisions, the board is not providing forward guidance to the market on future rate moves.  

• Despite the more challenging scenario, the current administration introduced new limits to private participation in the energy sector, diminishing business confidence. 

• Given weaker-than-expected activity data we now expect a GDP contraction for 2020 of 8.5% (from -8.1% in our previous scenario). In this context, the policy rate will likely end this year at 4.0%.
 

João Pedro Bumachar
Julio Ruiz



For the full version with all charts and tables, please open the attached pdf file



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