Yesterday, the Mexican central bank (Banxico) made the anticipated decision to cut interest rates by 25 basis points to 10.75%, according to Commerzbank’s FX strategist Michael Pfister. The 3-2 vote indicated a shift in focus towards growth concerns, despite an upward revision in the headline inflation forecast for the year.
While the real interest rate remains positive, Banxico’s decision to cut rates suggests a greater emphasis on stimulating growth rather than controlling inflation. With US recession concerns looming and the MXN depreciation, the Peso is likely to face continued pressure in the coming months.
Analysis:
The decision by Banxico to cut interest rates indicates a shift in focus towards economic growth rather than inflation control. This move could lead to further rate cuts in the future, as policymakers prioritize stimulating the economy. However, the Peso is expected to face continued pressure due to external risks and the central bank’s actions. Investors should monitor the situation closely and consider the potential impact on their portfolios.