After cutting rates by 50bp in a unanimous decision in March, the Board highlighted the weakness of economic growth and decline of inflation in its statement, and signalled further rates cuts ahead, potentially of a similar magnitude. The deterioration of the growth outlook since that meeting, amid the escalation of the trade war, have reinforced expectations that the Board will continue with the 50bp easing pace for now.
Banxico Governor Rodriguez recently described inflation as having been contained and below historical averages and said that further interest cuts are anticipated if inflation remains stable. Meanwhile, Deputy Governor Heath said that the central bank has room to keep cutting rates, given the stagnant economy, adding that further easing ahead was ‘highly probable’. Heath did caveat this by saying that rate decisions in the second half of the year will need a little more caution. As such, focus this week is likely to centre on what guidance the Board provides for the following meetings in June and beyond, and whether the 50bp easing pace can be expected to continue further ahead.