Banxico will continue its cycle of cuts; it will change its narrative to soften the adjustments.

Analysts from BNP Paribas, Goldman Sachs, and Banamex anticipate that the Bank of Mexico will cut the rate by 50 basis points during its decision on Thursday, June 26, as anticipated in its previous forward guidance, but will shift the narrative to prepare the market for more moderate adjustments.

Their forecasts are in line with the market average, as reported by Citi's survey on June 20, two days before the US bombing of Iran's nuclear facilities.

BNP Paribas Mexico economist Pamela Díaz Loubet explained that the rebound in core inflation in the first half of June indicates that pressures on services are not easing due to the economic slowdown, as the central bank had expected.

The headline inflation data and the Timely Indicator of Economic Activity (IOAE) for April are mixed, he commented. And no major deterioration in prices is seen due to geopolitical uncertainty, which would otherwise be transmitted through energy prices or the exchange rate.

Meanwhile, Goldman Sachs' Latin American economist, Alberto Ramos, believes the inflation figures are not an impediment to the Bank of Mexico continuing its cycle of rate cuts.

"The new surge in underlying inflation, along with the rigidity of services prices, indicates the need to be cautious in the short-term calibration of the rate, but the possibility of a 50-point cut in this week's decision remains."

As the BNP Paribas expert predicted, Ramos projected that "if more favorable inflation figures aren't presented in the next readings, the Governing Board will have to slow the pace of cuts to 25 basis points at the meeting scheduled for August."

In a note written by Banamex economists Paulina Anciola and Guillermina Rodríguez, they agreed to predict a 50-basis-point cut in this afternoon's decision, in a 4-1 split, with Deputy Governor Heath voting for a 25-point adjustment.

Like Díaz Loubet, they anticipate that in this meeting's decision, they will adjust their guidance for future actions with a "more dovish tone," indicating that going forward, the magnitude of cuts will be reduced today, returning to a pace of 25 basis points.

Nine clippings with four of 50 basis points

If his prediction is correct, this week's announcement will conclude the phase of four 50-basis-point cuts that have been introduced since February of this year.

Four of the nine cuts in the cycle since March 2024, which has brought the rate from a maximum of 11.25% to the current 8.50% and to the 8% expected by most analysts surveyed by Citi.

If the rate is raised to 8% as predicted by the three analysts consulted, the differential with the United States will be 350 points. International analysts have explained that Mexico's historical differential for years to attract capital is 400 points.