MEXICO: Deutsche Bank Sees 6.75% Year-End Policy Rate, Favours Short MXN/EUR

The first leaders' debate of the federal election campaign taking place this evening and broadcast on CBC News Network has been moved to an earlier timeslot. The French-language debate was due to start at 2000ET, but has been moved two hours forward to 1800ET (0100BST, 0900JST). The second debate (in English) is scheduled for tomorrow (17 April) at 1900ET. 

• A second change is that Green Party co-leader Jonathan Pedneault has been excluded from both debates. The Leaders' Debates Commission ruled that the reduction in ridings the Greens are contesting "for strategic reasons" means it no longer hits two of the three criteria (having one MP in the Commons, hitting 4% in nationwide polling, standing in at least 90% of ridings). As such, there will be four leaders on the stage: Carney, Conservative leader Pierre Poilievre, regionalist Bloc Québécois leader Yves-Francois Blanchet, and left-wing New Democratic Party leader Jagmeet Singh.
• While the impact of election debates can be non-existent or hugely consequential (see last year's Trump vs Biden debate in the US), tonight's debate will be most keenly followed in Canada's largest Francophone province, Quebec.
• CTV News quotes Daniel Béland, a political science professor at McGill University, “Now that people have been exposed to (Carney’s) French, it’s been criticised a lot, but it has not really affected voters that much, at least their opinion. And I think that’s related to the fact that the focus of the campaign isn’t really about culture, language or Quebec, or even [...] federalism. It’s about who can stand up to Donald Trump and who can fight for our economy...”
• The time shift is in order to avoid a clash with the crucial NHL contest between the Montreal Canadiens and the Carolina Hurricanes. A win/regulation tie for the Habs could see them enter the playoffs for the first time since the COVID-affected 2020-21 season. 

Chart 1. Federal Election Opinion Polling, % and 8-Poll Moving Average

Source: Liaison Strategies, Mainstreet Research, Nanos Research, Abacus Data, Innovative Research, Angus Reid, Pollara, MQO Research, Leger, Research Co., Ekos, Ipsos, Pallas Data, MNI

There were mixed developments in the ECB’s underlying inflation metrics in March, with model-based indices softening on an annual basis but trimmed mean/weighted median series a little sticker.

• Headline PCCI - the ECB's preferred measure of medium-term underlying inflationary pressures – eased to 2.25% from 2.31% in February. It remains above the 2024 average of 1.96%.
• Core PCCI was little changed at 2.09% vs 2.11% prior, while Supercore (which only includes items that are estimated to co-move with the business cycle) fell to a 39-month low of 2.6% (vs 2.7% prior).
• The 10% trimmed mean measure was steady at 2.3%, but the 30% trimmed meant rose a tenth to 2.5%.
• Meanwhile, the weighted median index rose four tenths to 2.7%, after 2.3% in February and 2.8% in January. 

There had been some speculation the BoC could change its estimates for neutral rates at this meeting (they typically re-examine it every April), with some analysts seeing risks they would up the range by 25bp and others seeing it lowered by 25bp. Instead, the BoC left it steady at 2.25-3.25%, meaning that the current overnight rate remains exactly in the middle of the range (see section in MPR)

• The MPR takes note of the 2 trade war scenarios described elsewhere - noting that potential growth in Canada is set to slow either way. However, they conclude that the Canadian neutral rate is unchanged vs last year's estimate, due to the strong link between the Canadian and US neutral rates. In turn, the report sees US neutral rates unchanged vs last year in either trade war scenario:
• "In Scenario 1, tighter immigration policy and rising macroeconomic uncertainty offset the impact of stronger productivity growth. In Scenario 2, potential output growth is weaker than in Scenario 1, and the ratio of government debt to gross domestic product is smaller. Both factors weigh on the US neutral rate but are not large enough to move the range."
• In this regard, the MPR also notes that there are risks the Canadian and US neutral rates could decouple in future, implying a higher Canadian neutral rate: "Structural changes, such as the impact of further isolation of the US economy, could affect the link between the US and Canadian neutral rates. If Canadian borrowers become less willing or find it harder to access funding in US capital markets, they would need to turn to other markets. Since the US capital market is the world’s largest and most liquid, this could lead to higher interest rates for Canadian borrowers. This would cause the Canadian neutral rate to rise."