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According to the Research Department at BBVA, the stability of the exchange rate and the improved inflation outlook will allow the Bank of Mexico to relax its monetary stance earlier than expected.  

Key Quotes:  

“GDP forecast for 2019 was revised down to 1.4% due to weak data from 4Q18 and 1Q19, along with a weak US manufacturing sector and a delay in the expected return on investment.”

“Inflation is expected to close 2019 at 3.4%, less than previously expected, in line with the surprise decreases at the start of the year.”

“We anticipate a cut in interest rates of 50 basis points this year (to 7.75%) and another 100 basis points next year (to 6.75%).”

“The exchange rate will remain close to this level for most of 2019 and 2020.”

“Risks are mainly related to Pemex and the ratification of the trade agreement with the US and Canada.”