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3w ago

Private Sector Sees Record Q3 GDP Contraction Risk as Banxico Plans Slower Easing

Following four half-point rate cuts, analysts expect Banxico to switch to 25-basis-point easing in August alongside rising inflation forecasts paired with muted growth expectations.

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Overview

  • Banxico’s June private-sector survey reports a 42.32% probability of GDP contraction in the third quarter, the highest level on record.
  • After four consecutive 50-basis-point cuts brought the policy rate to 8.00%, 33 of 38 Citi survey participants anticipate a 25-basis-point reduction in August.
  • The median forecast maintains the policy rate at 7.50% by the end of 2025, reflecting a moderated easing cycle.
  • Analysts raised their 2025 GDP growth forecast to 0.20% and lifted headline and core inflation projections for year-end to 4.0%.
  • The peso is expected to trade at MXN20.00 per dollar by the close of 2025 and at MXN20.50 by the end of 2026.