JP Morgan Predicts Banxico Will Cut Interest Rate by 50 Basis Points

J.P. Morgan anticipates that the Bank of Mexico (Banxico) might lower interest rates by 50 basis points in its upcoming monetary policy meeting in December, compared to the previous cut of 25 basis points, following the release of the inflation report on Monday.

Official data showed that the overall inflation rate in the country for the past 12 months decreased slightly more than expected in November, after an increase the previous month, which has led to expectations that the central bank will continue to lower its benchmark interest rate. "If there is an opportunity to reduce rates by 50 basis points and adjust the policy to a less restrictive approach, now is the right time," analysts at J.P. Morgan said in a note issued on Monday. The latest inflation figures will be released before Banxico's meeting scheduled for next week, after the bank lowered financing costs by 25 basis points in three consecutive meetings, bringing them down to 10.25%, and hinted at the possibility of further cuts if consumer price projections improve. "Going forward, we forecast that the opportunity for aggressive easing will be impacted to the extent that core inflation begins to rise again, the economy shows more strength, and the Fed adopts a more cautious approach," J.P. Morgan added.

The potential rate cut by Banxico could help stimulate consumption and investment, which in turn could further reactivate the Mexican economy. However, it is crucial to closely monitor signs of core inflation to avoid overheating the market, which could lead to an inflationary cycle. In the financial realm, a balanced approach between growth and inflation control is key to promoting sustainable economic development.