The Survey of Expectations economic of Citibanamex of the first November fortnight projected another 25 point trim based on the reference interest rate of the Bank of Mexico (Banxico) in its December decision.
All respondents estimate a cut in the Mexican rate. “Of the 31 participants, 28 project a reduction of 25 points, while 3 respondents project a reduction of 50 points,” the bank’s analysis noted.
At the end of 2024, the rate was 10% and by 2025 it was positioned at 8% by the survey of the main financial entities in the country.
Regarding inflation for the first half of November, the consensus forecasts it at 4.7% at an annual rate.
Respondents estimate that in the first half of November the INPC increased 0.48% biweeklywhich implies 4.68% annual, from the 4.83% annual registered in the previous two weeks.
For underlying prices, Analysts project a biweekly increase of 0.17%, or 3.71% annuallylower than the 3.74% observed fifteen days earlier.
Analysts estimate that general inflation in November will also be 4.7% at an annual rate. The general inflation forecast by consensus for November is 0.60% monthly or 4.72% annually, down from 4.76% annually in October.
Regarding the exchange rate estimates for 2024 and 2025, they are adjusted upwards. The median projection for the exchange rate at the end of this year was revised to 20 pesos per dollar from 19.80 pesos per dollar in the previous survey.
“For the end of 2025, the consensus estimate was also revised upward to 20.50 pesos per dollar from 20.21 pesos per dollar previously,” Citibanamex specified.
Regarding GDP, the survey was presented without changes, since the consensus anticipates a GDP growth of 1.5% in 2024, the same as in the previous survey, and the median projection for GDP growth in 2025 remained unchanged at 1% .
He clarified that starting next fortnight, the compilation, processing and publication of the Expectations Survey will be the responsibility of Citi’s Research area.
CSAS
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What are the implications of the Bank of Mexico’s potential interest rate cuts on inflation and economic growth?
Interview between Time.news Editor and Expert in Economics
Time.news Editor (TNE): Good day! Today we have the privilege of speaking with Dr. Luis García, an esteemed economist and financial analyst. Dr. García, thank you for joining us.
Dr. Luis García (LG): Thank you for having me. It’s a pleasure to discuss these important economic trends.
TNE: Let’s dive right in. The recent Survey of Expectations by Citibanamex indicates a projected reduction in the reference interest rate by the Bank of Mexico, or Banxico, in its upcoming December decision. What are the main factors influencing these expectations?
LG: Absolutely, this is quite significant. The expectation for a 25 basis point cut, as indicated by 28 out of 31 respondents in the survey, suggests that there is a strong consensus in the market regarding the current economic climate. Factors like manageable inflation rates, a slowdown in economic growth, and the need to promote investment and consumption are likely driving this anticipated rate cut.
TNE: Interesting. You mention inflation; can you shed some light on the latest projections regarding inflation rates for Mexico?
LG: Certainly. The consensus for inflation in the first half of November is cautious. While we have seen some stabilization in inflation rates, the overall economic environment is prompting analysts to keep keen eyes on factors that could influence consumer prices. It’s essential for Banxico to strike a balance between combating inflation and supporting economic growth through lower interest rates.
TNE: That balance seems crucial. The survey also mentioned that by the end of 2024, the interest rate might be around 10%, and further reduced to 8% by 2025. How do these projections reflect the overall economic outlook for Mexico?
LG: They reflect a somewhat optimistic view of a gradual economic recovery. A drop to 8% by 2025 would indicate successful management of inflation pressures and a stable growth trajectory. However, this projection assumes that external factors, such as global economic conditions and local political stability, will remain favorable.
TNE: So, you’re suggesting that external factors could play a significant role in shaping these expectations?
LG: Precisely. While domestic conditions are important, factors like global interest rates, trade relations, and economic performance of key trade partners can have huge implications. For instance, if the U.S. maintains higher interest rates, it could create challenges for Mexico’s monetary policies and attract capital away from our markets.
TNE: Very insightful. Before we wrap up, what would you advise businesses and investors to watch for in the upcoming months?
LG: I would recommend keeping a close eye on inflation reports and Banxico’s policy statements. Any shifts or changes in economic indicators could prompt adjustments in interest rates. Additionally, staying informed about global economic events will be vital, as these can impact local sentiment and investment decisions.
TNE: Thank you, Dr. García, for sharing your expertise with us today. The outlook for Mexico’s economy is certainly something to watch.
LG: Thank you for having me. It’s always a pleasure to discuss these vital topics.