📝Expect Banxico to Cut Rates By 25Bps In March: UBS Strategy

Mexico's central bank on Wednesday lowered its growth forecast for 2024 to 2.8% from 3.0%, largely due to carryover effects, and said headline inflation would be slightly higher, at 3,5% versus 3.4%. Inflation is still seen converging to the 3% target in the second quarter of 2025, although risks to inflation are to the upside. The latest quarterly inflation report said the Banxico board will assess the possibility of adjusting its key interest rate in the next monetary policy meetings. Markets are divided over a March cut, but UBS Economics believes Banxico is behind the curve and will cut by 25bp; after that the discussion is whether the central bank will accelerate the size of cuts. The team says the think the risk/reward for receivers is attractive and likes 2y MX1.4 rates.

-UBS Strategy