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Mexico Rate Cut

It appears that Mexico’s inflation is finally getting under control. But, at the same time, the economy is starting to sputter. So far it has only barely escaped a technical recession, with growth far from prior levels.

But, the Central Bank finally has room to take action that the government has been pushing for ever since the new President took office.

Despite two cuts so far, Mexico still has the highest interest rate in the world, when taking into account inflation.

This hasn’t done much to encourage capital flows. The Mexican peso has been under pressure due to increased capital outflows, as well as the rate cuts. And that trend doesn’t seem likely to change soon.

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What We Are Expecting

Not only is there a strong consensus in favor of a rate cut, but there is even a majority chance of a 50 basis point cut this time around.

In the last meeting, the vote was split between cutting 25 or 50 bps. Th...

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