Interest Rate Forecast For Mexico Revised To 4.25%

• On August 27, the Banco de México (Banxico) released the minutes from its monetary policy meeting on August 13, at which policymakers decided to cut the bank’s benchmark interest rate by 50 basis points (bps), to 4.50%. This was the fifth consecutive 50bps cut and brought total cuts since the beginning of the current easing cycle in August 2019 to 375bps.
• The decision, unlike the previous four, was not unanimous, as one board member voted for a 25bps cut instead. The bank also released its Q2 2020 Quarterly Report on August 26, in which it lowered its 2020 real GDP forecast sharply while raising its inflation forecast above the 3% target.
• As a result, Fitch Solutions revised its end-2020 interest rate forecast to 4.25%, from 4.50% previously, based on its expectation that the bank will slow the pace of cuts to 25bps at its meeting on September 24. The bank will then hold the rate at 4.25% through the end-2021.

(Source: Fitch Solutions)