📝We Now See A 50Bps Rate Cut From Banxico In May: Rabobank

Mexico imported 23% of its industrial machinery from China in 2024, and a third of its electrical machinery. As a part of the government’s plan for Mexico, Sheinbaum announced the ‘Decreto Relocalización’, which includes investment in technology, research, and development, as well as additional subsidies for training and education. In her 100-day speech to the Mexican people in January, Sheinbaum praised the USMCA and Mexico’s strong relationship with the US, citing that the USMCA was the best defense against trade giants like China. As such, Mexico is in an advantageous position compared to some of its peers, as Sheinbaum and Trump’s incentives on pivoting away from Chinese trade influence align. Of course, it would be more beneficial to Mexico if Trump removed all tariffs on Mexican goods and continued to solely target China. However, it is up to Sheinbaum to take advantage of Mexico’s comparatively favorable position and strengthen Mexico’s relationship with the US going forward.

We adjusted our Banxico rate forecast for the May 15 meeting from a 25bp to a 50bp cut. Nevertheless, favorable CPI inflation data alone does not justify another 50bp cut. Indeed, the Mexican growth outlook is deteriorating. - Rabobank