- Regime change and market turmoil: we outlined our strategies as markets have been reeling under the effect of tariff-related noise and navigate an environment characterized by a transformative shift in the political economy.
- Our strategies in sum: The adjustment in USTs may begin to lose steam as the Fed positions itself for the impending shock. We reaffirm our longstanding constructive view on the short end (2-7 years) of the MBono curve, which should continue to steepen, and expect Banxico to cut interest rates to 7.5% by YE25.
- Banxico’s next steps: Last Thursday Banco de México released the minutes from its latest policy decision. The Board highlighted expectations of weaker global growth and ongoing trade distortions, including the frontloading of exports and imports. Members also noted the Federal Reserve’s concern that tariffs may slow progress on disinflation. Regarding local economic activity, and beyond the data already pointing to a slowdown, the Board indicated that its estimate of the output gap is negative and the balance of risks remains tilted to the downside.
- Mexico’s macroeconomic indicators: On the macro front, inflation and industrial production data were released last week.