Mexico's Gross Domestic Product (GDP) showed strength in 2023, growing 3.1% compared to the previous year.
But the data published this Tuesday by the National Institute of Geography and Statistics (Inegi) show a slowdown in the last quarter.
This can put pressure on the Governing Board of the central bank, who define the reference interest rate in the financial system as a tool to contain inflation.
The current rate of 11.25% is the highest since monetary policy has been in force in Mexico.
National GDP fell 0.1% in the last quarter of 2023, compared to the previous quarter.
Meanwhile, inflation rose, according to the Consumer Price Index which increased 4.5% in December.
This paints a complicated picture for the Bank of Mexico, which has held the interest rate at a record to contain inflation, but now this decision may be having an impact on economic growth.
“The sharp slowdown increases the chances of a Banxico cut next week,” wrote Jasontuvoy, an economist specializing in emerging markets for the firm Capital Economics in England in a report on Tuesday.
Porquey refers to the monetary policy decision of the Bank of Mexico scheduled for February 8.
“Before Tuesday's data release, we thought the chances of a rate cut in February were 50-50.
If the Fed takes a more dovish tone at the Federal Reserve meeting, that could be enough for Banxico to pull the trigger.”
The Governing Board of the Bank of Mexico has acted, first, in advance of the decisions of the US central bank and, later, with a certain synchronicity.
The Mexican central bank began raising the interest rate before the Fed did so in the United States and has kept it considerably higher since 2021. This has generated an attractive differential through which foreign investors have purchased instruments in Mexican pesos.
Now, the Federal Reserve is also considering the possibility of lowering its own rate, so that its counterparts in Mexico could also do so without triggering a sudden capital outflow.
“We expect growth in Mexico to remain slow in the coming quarters,”tuvoy wrote.
“The restrictive monetary stance will affect credit growth.
Investment, which was a key support for growth last year, will become a burden as important transportation infrastructure projects such as the Mayan Train are completed,” he added, referring to President Andrés Manuel's flagship projects. Lopez Obrador.
Both Capital Economics and other firms expect a slowdown in the US that would impact Mexico through exports, remittances and tourism.
The International Monetary Fund (IMF) raised its economic growth estimate for Mexico to 2.7% this year, which would imply a slowdown compared to 2023.
“There is a greater likelihood that Banxico could gradually ease its restrictive stance, potentially starting with a 25 basis point cut at the March meeting,” wrote analysts at Bogotá-based firm CrediCorp Capital.
“However, the year-end level of the reference interest rate in 2024 remains uncertain, depending on the evolution of inflation risks and external interest rates,” the company warned.
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