Monetary policy and macroeconomic indicators take center stage this week as markets assess the path forward for both the Federal Reserve and Banco de México. While global sentiment remains influenced by trade risks, monetary policy remains a key driver. In the US, inflationary pressures persist, leading the Fed to maintain a cautious stance, more detail to be released on the minutes from their last meeting. In Mexico, Banxico’s upcoming report and minutes from the last meeting will shed light on inflation trends and the potential for rate cuts, with a 50bp reduction in March still likely despite a cautious Fed.
On the macroeconomic front, final GDP data for 2024 and December’s IGAE will confirm a slowing economy, with growth expected to dip below potential in 2025.
Last week, we published our January 2025 Bondholders and Flows Report, we highlight persistent outflows. Banxico’s shift toward a less restrictive stance could support the front end of the nominal curve, while a higher risk premium may limit foreign participation. In credit markets, we published our recap of 2024 and our outlook for 2025. LatAm corporate spreads tightened in 2024, but rising volatility and trade risks could reshape conditions in 2025, especially in sectors with strong US trade exposure.