Fynsa
If we believe that the Central Bank will do everything necessary to achieve its goal, then market prices would not be consistent.
The fact that the risks have not materialized does not mean that they may not do so, but at a later date. External pressures and the weakness of the peso could reactivate inflation in 2025.
We project a further 25bp cut at the December meeting, which would end 2024 at 5.0%. As we estimate the neutral rate at 4.25%, three more cuts should occur during the first half of next year, with room for some pauses only if needed due to the economic situation.
The October CPI does not set alarm bells ringing, nor does it change the downward trajectory that inflation has been on for some time now. It is true that the significant increase in electricity tariffs has delayed this process, but we are opposed to thinking that it has diverted it completely.
The monetary policy strategy should remain unchanged, while the tightening cycle will continue at a less aggressive pace than in the past, with 25 bp cuts in October and December. Thus, the TPM would close the year at 5.00%.
The expectation that the Fed will begin its monetary policy normalization process at the next meeting.
We continue to see that, excluding the impact that electricity tariffs could have, inflationary pressures in the economy are low and continue to reflect stagnant activity.
From a monetary policy standpoint, we see that with the recent data, not only on inflation but also on activity, the Central Bank has room to continue lowering the rate.
It could hardly be argued that there is still a long way to go to return to normal inflation, as is happening in other economies.
