February 06, 2025

Mexico: 50bp Rate Cut To 9.5% (Consensus 9.5%) in Feb-25
- Banco de México accelerated its rate-cutting cycle by reducing the overnight interbank interest rate by 50 basis points to 9.50%, reflecting greater confidence in disinflation and recognising growing economic weakness.
- Inflation is expected to reach the 3% target by Q3 2026, but risks remain skewed to the upside, including persistent core inflation and trade policy uncertainty following the US's tariff announcements.
- The central bank signalled the possibility of further rate cuts of similar magnitude. However, it will maintain a restrictive stance, with decisions guided by inflation trends, economic activity, and external risks.
January 30, 2025

US: Policy Rate Held At 4.5% (Consensus 4.5%) in Jan-25
- The Federal Reserve held the federal funds rate at 4.25%-4.50%, pausing after prior cuts in response to stable labour market conditions and still-elevated inflation.
- Inflation has declined significantly but remains above target, with core PCE at 2.8%, justifying a cautious approach to further easing.
- Future rate moves will depend on inflation and labour market trends, with the Fed retaining flexibility. We still expect a final cut in March.
January 29, 2025

Sweden: 25bp Rate Cut to 2.25% (Consensus 2.25%) in Jan-25
- The Riksbank cut its policy rate by 0.25pp to 2.25%, in line with the consensus forecast, citing weak economic activity and contained inflation risks.
- Forward guidance suggests a cautious approach to future rate cuts, with policymakers closely monitoring the delayed impact of previous reductions on demand and inflation.
- External risks, including geopolitical tensions and economic policy uncertainty in major economies, alongside domestic factors like the krona’s exchange rate, will be key in shaping the future interest rate trajectory.
January 29, 2025

Brazil: 100bp Rate Hike To 13.25% (Consensus 13.25%) in Jan-25
- Brazil's Copom unsurprisingly raised the Selic rate by 100bp to 13.25%, continuing its aggressive tightening cycle to counter rising inflation expectations and persistent inflationary pressures.
- Elevated services inflation, labour market resilience, currency depreciation, and fiscal risks necessitate further contractionary policy, with inflation risks skewed to the upside.
- Copom anticipates another 100bp hike at the next meeting but remains data-dependent beyond that, with inflation expectations, fiscal policy developments, and global risks guiding future decisions.
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