PPI has often given us a 3–6 month preview of turns in CPI cycles (secondary sector inflation sheds light on core goods, and tertiary sector inflation on core services). As charts 3 and 4 show, so far, core services inflation has been very sticky (which we see as partly driven by tight labour markets), but core goods prices trends have been a relief for Banxico. However, if the PPI-CPI relationship holds, the good news on core goods CPI may soon turn into bad news considering the recent run up in secondary PPI.
Overall, the Banxico policy outlook is challenging, but given current heightened levels of uncertainty we think risk-reward favours prudence. We anticipate Banxico will stay put in its looming policy-setting meeting (we would not be surprised by a 5–0 “hold” decision), and we maintain a September cut lightly penciled in (with the eraser already at the ready), and a higher conviction 25bps cut in December, alongside the Fed. We think this would be a prudent path for the central bank, particularly given that Mexican market uncertainty could pick up as we head into the final stretch of the year, due to: a) the budget presented by the government for 2025 with its potential changes to tax policy or the reactions of rating agencies, b) the government’s “constitutional reform” package which could be submitted to Congress in that window, c) the final stretch of the US electoral process, where Trump’s tariff proposals could also impact both rates (due to the impact of tariffs on inflation), and FX markets. - Scotiabank
コメント