Central Banks

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Goldman Sachs say that Banco de México, Mexico's central bank may respond with a surprise rate cut They cite an underperforming economy, cost of border protection and widening output gap.

mexico central bank

Goldman Sachs issued a note Monday on Mexico following the agreement between the US and Mexico on immigration to avoid tariffs. They warned to be wary of a Mexican central bank rate cut with little warning Goldman see a rate cut possibly as early as September and noted that monetary policy in Mexico is was "way too tight".

Reasons to cut are numerous

  • Economy underperforming
  • Output gap widening
  • Signs of a damaged jobs market

Goldman does have something good to say, they see a positive is demand, with no cut needed to boost demand

The new deal with the US adds costs for Mexico such as border protection and housing and feeding asylum seekers. There is also the potential potential political cost and lower rats may alleviate some of that.

From The Traders Community News Desk

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