Fynsa
At the first Monetary Policy Meeting of the year, the Central Bank cut the TPM by 100 bps, from 8.25% to 7.25%. Although the decision was expected by the market, there was some dispersion in the projections, not only in the magnitude of the decrease, but also in what could be signaled for the following meetings.
This slightly accelerates the pace with respect to the previous meeting, but it is set in a context in which the last inflation data was much lower than expected and the next meeting will only be in early April, accompanied by an MPI the following day. Moreover, the decision was not unanimous, the decision was not unanimous, as board member Céspedes voted for a 125 bp cut, which was also a likely option in the analysts' debate.
Within the conjunctural analysis, we would say that the international information has gone as expected, although the expectations regarding the interest rate differential have once again provoked a significant depreciation of the peso. It is curious that, in spite of the above, the actions taken on this occasion are totally different from those taken in October of last year.
On the local front, despite the initial downplaying of the statements made at a seminar by counselor Naudón, the statement mentions exactly what he said on that occasion: total inflation is expected to converge sooner than expected to the target, causing the TPM to reach neutrality during the second part of the year. Will there be 4 (3 of 100 bps and one of 25 bps) or 5 (2 of 100 bps, 2 of 50 bps and one of 25 bps)? We would then be talking about July or September. In any case, in the event that this is evidenced by the data, this process may be faster, accelerating the cuts up to the 125 bp suggested by Céspedes, with a combination that would allow arriving in June, just for the IPoM of that month.
Although the recent Imacec data, which very unexpectedly fell 1.0% in its year-on-year comparison could boost the latter option, we believe that it would be hasty to consider this data as permanent, given that previous figures were not along the same lines. Thus, it will be vital to monitor the upcoming data to assess the need to accelerate the process and, perhaps, project cuts beyond 4.00%. For the time being, this is only a risk scenario.
