An estimated 13 economists at financial groups, trade consultants and investment advisors expect the Bank of Mexico (Banxico) to pause the upper wheel of monetary policy this Thursday, leaving it unchanged at 11.25%.
If the forecast for the third monetary decision of the year, set for this afternoon, is correct, it will end the longest upward cycle since Benxico began setting direct rate levels, which had lasted 21 months.
According to information contained in the monthly expectations report, the so-called LatinFocus Consensus Forecast, Focus Economics highlights that these experts do not make up the majority of the sample of 40 experts interviewed.
Eight offices, barely a fifth of the total, estimate there could still be an additional quarter-point increase that would take it to the terminal level of 11.50 percent.
Less than 24 hours before the Governing Board reports its third monetary decision of the year, Focus Economics’s reading on market expectations is that “a majority of 40 respondents do not see a large rate hike since it took effect in March.” , when they took it to 11.25%, but some still expect an additional hike of 25 basis points which will further strengthen the monetary position.
The upward cycle of the Mexican rate is part of the dam that all the world’s central banks have tried to put on global inflation due to the pandemic and Russia’s invasion of Ukraine. The Mexican cycle that took the rate from 4% where it was in May 2021, to 11.25% where it is today, in 15 movements.
The rate will come down to 10.84%
In the report, the consultancy reveals that the panellists’ consensus estimate is that by the end of the year, the interbank funding rate will be 10.84%, a forecast that includes the possibility of some end-of-cycle rate cuts.
If this forecast is correct, the rate will return to close to the level of December last year, when it reached 10.50% after 13 consecutive hikes.
The results of the report released by Focus Economics show that by the end of next year, the panellists’ consensus forecast is that the governing board will continue to adjust the rate downwards to leave it at 8.27 percent. If this forecast is correct, the rate will return to a level close to 8.50%, where it was in August 2019 before the pandemic.
These assumptions, gathered by the consultancy, would favor inflation reaching a range of 5.1% at the end of the current year.
At that point, the panelists’ consensus expected inflation to be 3.9 percent.
Regarding the performance of the Mexican economy, experts estimate that the GDP will register a growth of 1.7% this year.