Overview of Analysts’ Predictions on Mexico’s Interest Rates
According to a recent Citi survey, analysts predict that the Banco de México will pause its rate-cutting cycle until May. This pause reflects the time it is expected to take for the Bank’s governing board to assess the impact of tax increases, tariffs, and minimum wage hikes on inflation.
Analysts’ Expectations for Rate Cuts
- May Recorte: 18 out of 35 analysts surveyed believe the first rate cut of 25 basis points will occur in May, an increase from 13 analysts in the January 6 survey.
- Extended Pause: Three analysts expect the pause to last for the first five months of the year, with rate cuts resuming by June 25 (Actinver, BBVA, and Deloitte).
- Shorter Pause: Four analysts anticipate a shorter pause, with rate cuts resuming at the March 26 meeting (Signum Research, Oxford Economics, and Natixis e Invex).
- No Interruption: Four analysts expect no interruption in the rate-cutting cycle, with adjustments either in the February 5 meeting (Scotiabank and Thorne & Associates) or in January, though outside the scheduled calendar (HSBC and Santander).
Target Taper Rate
Out of the 35 analysts surveyed, 25 expect the taper rate to end at 6.50% this year. Citi, one of the panelists, shares this projection. However, there are differing opinions:
- Bank of America and Epicurus Investment: They anticipate the rate will reach 6% through four 25-basis-point cuts or two 50-basis-point cuts.
- XP Investments, Oxford Economics, and Banco Base: They estimate the rate will reach 6.25% through prolonged cuts.
- Bx+, Invex, Itaú BBA: They predict only one cut this year, ending at 6.75%.
- Santander México: They believe no cuts will occur in 2023, leaving the rate at 7%.
Inflation Forecasts
Analysts predict that inflation will not reach the 3% target by 2027. They project annual price increases for the National Consumer Price Index (INPC) and underlying inflation to be 4% this year and in 2027. Citi expects inflation to end at 4.24% this year and 3.66% in 2027.
Economic Growth Projections
Market expectations for Mexico’s economic growth remain at 1.3% for this year and 1.8% for the following year, similar to the World Bank’s projection but lower than the FMI’s 1.5% and the federal government’s estimated range of 1.8% to 2.8%. The consensus market predicts a GDP of 0.4% for 2025, to be released by Inegi on January 30.
