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Oil Update: Pipe Dreams

• With so many conflicting signals emerging from the US Administration, it is not surprising that both investors and extractors are increasingly cautious about politicians’ aspirations for the hydrocarbons market in both the US and Canada. This may be some small consolation for Opec.

By Alastair Newton

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.

Mexico: 25bp Rate Cut To 10.0% (Consensus 10.0%) in Dec-24

• Banco de México reduced the overnight interbank rate by 25 basis points to 10.00%, continuing its cautious easing amid declining headline and core inflation trends. Global inflation persistence adds uncertainty.
• It expects inflation to reach the 3% target by Q3 2026, but risks remain skewed to the upside, driven by potential trade policy shifts, persistent services inflation, and geopolitical disruptions.
• Future rate decisions will balance the easing cycle with the need for a restrictive stance. They will rely on data to assess the fading of global shocks and domestic inflationary pressures.

Mexico: 25bp Rate Cut To 10.25% (Consensus 10.25%) in Nov-24

• Banco de México reduced its overnight interest rate by 25 basis points to 10.25%, matching market expectations and signalling a shift from a restrictive stance amid stabilising core inflation trends.
• Future rate decisions will be data-dependent, considering global disinflation patterns, geopolitical risks, domestic currency volatility, and potential economic slowdown in 2025.
• The inflation trajectory, with projections for convergence to target by Q4 2025, underpins a cautious policy outlook with risks biased to the upside due to persistent core pressures and potential foreign exchange impacts.