Banxico cut the overnight policy rate 25 bps to 11.00% on Thursday, March 21. The decision revealed a 4 to 1 split with Irene Espinosa dissenting in favor of a no-change decision. The accompanying inflation forecasts were largely unchanged except for a 0.1ppt upward revision to the 2024 headline CPI forecast which was raised from 3.5% to 3.6%. Inflation up, rates down.

Our forecast for the end of year policy rate is unchanged at 9.50% as we are now assuming 25 bps cuts at every meeting; previously, we had expected a pick up to 50 bps clips in Q4.

USD/MXN hardly moved in response to the decision given it was largely priced in. We continue to see 16.60 as key support on the downside, while marked MXN weakness is unlikely given the current carry environment.