🏦🇲🇽Cable FX Macro Weekly Note: Banxico February Rate Decision

**As seen in Risk In The Week report 02/02/24, subscribe at cablefxm.co.uk/reports

Banco de Mexico left monetary policy unchanged at 11.25% in December, the central bank has kept rates steady since March and it signaled that policy will stay on hold for some time. Banxico expects further disinflation given restrictive rate levels, they said that food and services CPI are set to ease slower than previously estimated. The board added that the long-term price forecast is relatively stable and above target. Banxico pencils inflation will rise by 4.10% in 2024 and by 3.60% in 2025, and growth is seen slowing to 2.20% this year.

The market expects Banxico to start easing policy this year, given that this is the first meeting of 2024, the focus will lie on any hints of policy normalization. Analysts at Citi expect the central bank to keep the rate steady while it opens the door for a March rate cut. Citi points to a strong MXN, declining inflation, and slowing activity as reasons for the board to start thinking about a lower policy rate, they see the cost of money at 8.50% by the end of 2024. Deutsche Bank holds to its 1Q rate cut call and sees Mexico 2024 headline and core CPI at 4.7% and 4.6%, respectively.