The financial institution Citibanamex anticipates the Bank of Mexico will cut rates in June and its members are increasingly worried about global growth and the possibility of a recession in the United States.
The Bank of Mexico (Banxico) will cut its reference interest rate towards the month of June, by 25 basis points, with what would remain at a level of 8.0 percent, Citibanamex analysts reiterated.
"We confirmed our forecast of a rate cut in June 2019. We believe that this forecast is at risk to some extent given that the Banxico statement remains in a restrictive tone."
In the weeks following the last policy decision, even when the inflation data continues to be favorable, significant increases were observed in various wage indicators and some economic activity data have been better than expected. However, an opportunity to initiate cuts will be presented relatively soon, a member of the Board commented. Except for surprises, the wide range of perspectives expressed in the minutes, the continued appreciation of the peso against the dollar, the greater slack and a Fed plus "dove" support this forecast.
Of course, it would not be surprising if in the May monetary policy decision at least one dissenting vote was given by Deputy Governor Gerardo Esquivel. The financial institution said that Banxico's minutes revealed that members are increasingly worried about global growth and the possibility of a recession in the United States.
The outlook that global growth is slowing and that risks continue to be biased downward was widespread, which was more obvious in the discussion on growth in the United States, with the majority of the members of the Governing Board in agreement that the probability of a recession in that country in the next 12 months increased. However, regarding the outlook for economic activity and inflation in Mexico, the minutes expressed more diverse points of view than what was seen in the statement.
The majority agreed that economic growth continued to slow down in 2019, with a varied perception regarding the magnitude of the slowdown.
"We note especially a change in the order of downside risks to growth, highlighting factors of" uncertainty "that could adversely impact consumption and investment, the possibility of a downgrade in the Pemex or sovereign rating, and lags higher than expected in public spending ".
A couple of members emphasized the possibility of a long list of factors that would imply a more optimistic outlook for growth, which in our opinion begins to reflect the widening of perceptions among the members of the Governing Board.