Central Bank of Mexico will cut its key rate to bring it to 11%, most analysts say.

The statement will highlight the upside risks to inflation and base the decision on the weakening economic activity.

Following the monetary announcement by the Fed, investment advisors at Bank of America Securities, Deutsche Bank, and Goldman Sachs confirm their forecast that the Bank of Mexico (Banxico) will implement the first rate cut in the scheduled decision this Thursday, March 21st.

They agree that it will be a quarter-point cut, leaving the rate at 11.00%, and anticipate that the tone of the statement will be restrictive to make it clear to the market that it will not be the start of an easing cycle.

The USD/MXN pair has maintained itself away from highs and is currently at a “super-peso” stage, which means the Mexican peso is very strong compared to the US dollar. This has happened thanks to nearshoring.

From New York, the chief economist at Bank of America Securities (BofA Securities) anticipated that it will be a decision made by a majority, in a composition of 3 to 2, or 4 to one.

“The sense of the statement will underscore the upside risks to inflation and, as it has long signaled, will argue the decision based on the weakening of economic activity observed in the last quarter of last year and will allude to the moderation of general inflation.”

Also from Wall Street, the Chief Economist for Latin America at Deutsche Bank confirmed his forecast that Banxico will preempt the Fed in cutting rates.

The last time the rate was at 11%, where it would stand after today’s cut, was in February 2023. At that time, annual inflation stood at 7.62% and core inflation at 8.29%.

If their forecast proves correct, Banxico’s rate cut will be the first in that direction in three years. In February 2021, was the last time the Governing Board cut the rate. The decision was unanimous, leaving the rate at four percent.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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