- The markets will be focused on Banco de México’s monetary policy decision on Thursday of this week (15 May), regarding which we are anticipating a 50bp rate cut. While Banxico’s top priority remains keeping inflation low and stable, its recent quarterly reports and minutes underscored that Board members are increasingly shifting their attention to economic activity.
- Regarding inflation, Banxico’s forecasts were left unchanged in the last decision in March. However, the latest three bi-weekly prints showed inflation nearing 4.0% again and looking likely to persist around this level throughout 2Q25. As such, we anticipate that inflation forecasts will be revised up, at least in the very short term.
- Swap spreads have moved into negative territory across all tenors and; as a result, we maintain a constructive stance on MBonos, particularly in the 2-7Y area, relative to TIIEs, and anticipate a normalisation of swap spreads.
- The latest monetary policy decision was announced in the US last week. As widely anticipated by the market, the FOMC left the policy rate unchanged, maintaining it within a range of 4.25-4.50%. The FOMC reiterated that future policy decisions will remain data dependent.
- This week’s CPI data may begin to reflect tariff-induced distortions, although lower prices of both oil and financial services could provide some relief. The Cleveland Fed is anticipating a 0.23% increase in the core index (2.76% YoY) and a 0.22% rise in the headline print (2.34% YoY).
- Last week was also replete with local macro prints ahead of Banxico’s meeting next Thursday. While inflation saw a modest uptick to 3.9%, timely activity prints released during the week presented a concerning picture of the potential tariff shock to activity in 2Q25. In addition, IMSS employment data showed job losses, and AMIA figures reflected an annual decline in both production and exports.