EM LATAM CREDIT: Mex. Govt owned Elec Co. Moves into Telco Market in a Major Way

The MNI Markets Team’s expectations for the updated Economic Projections are below.

• This will largely mark-to-market the stronger growth, lower unemployment and higher inflation in 2024 than foreseen in the September projections, rather than a wholesale change in the outlook.
• The main risks to our expectations are to the upside for 2024 real GDP (could be as high as 2.7-2.8%) and core PCE inflation (could be 2.9% depending on participants' assumptions).
• We will also be watching the longer-run variables, particularly longer-run GDP growth which could be nudged higher from 1.8% at a meeting in the not-too-distant future.
• We don’t expect the forecasts to incorporate anticipated policy changes under the incoming Trump administration - instead, as we explain in our full Fed preview, we expect it to be reflected in the forecast uncertainty diffusion indices provided with the SEP materials.
• By the same token, if uncertainties are extreme with risks pointing in the same direction (eg higher growth and inflation), it could just mean that the December economic projections are obsolete upon publication as they don't reflect participants' "true" view of the impact of tariff and trade policy shifts.

• 2026-27: While the 2025 median will show a rise vs September, we would expect the number of cuts in 2026 to remain roughly the same: 50bp (to 3.1%, up from 2.9% prior). However there may be no further cutting in 2027 (to steady at 3.1%, vs 2.9% in the September projections). That’s largely contingent on an increase in the longer-run dot, however, and we think the 2027 split will be very close between 2.9 and 3.1%.
   
• Longer-Run: The longer-run dot has shifted up in each quarterly projection so far in 2024, from 2.50% last December, to 2.625% in March, to 2.75% in June, and finally to 2.875% in September.
• There were 9 participants at 3.00% or above (including 7 at 3.25% or above), with 2 on 2.875% and 8 below that (2.375% the lowest dot). This means it would take only one of 10 dots dot to shift above 2.875% to move the median higher to 3.00%, and we would not be surprised to see such a move.
• That would bring it back to a level last seen in September 2018, and up from the trough of 2.40% in 2022. 

• US TSY 17W BILL AUCTION: HIGH 4.220%(ALLOT 75.52%)
• US TSY 17W BILL AUCTION: DEALERS TAKE 31.85% OF COMPETITIVES
• US TSY 17W BILL AUCTION: DIRECTS TAKE 4.73% OF COMPETITIVES
• US TSY 17W BILL AUCTION: INDIRECTS TAKE 63.41% OF COMPETITIVES
• US TSY 17W BILL AUCTION: BID/CVR 2.97