Bloomberg News

Banco Santander Sees Banxico Cutting Rates by 25 Bps in March

January 23, 2012

Jan. 20 (Bloomberg) -- Banco Santander SA expects Mexico’s central bank to cut the benchmark lending rate by 25 basis points on its next meeting on March 16, the bank said today in a report to clients.

Banco Santander changed its forecast from a 50 basis points rate cut after Mexico’s central bank, or Banxico, kept interest rate unchanged today for 24th consecutive meeting.

“It is our take that Banxico is willing to keep its options open, on the back of global economic deterioration, limited pass-through effects on core prices and relatively anchored inflation expectations,” Banco Santander SA economist Gabriel Lozano wrote to clients.

“We maintain our expectation of a rate cut, but instead of a 50 basis point call, we now believe it will be of 25 basis points, which will bring the Fondeo rate to 4.25% in March,” Lozano wrote. “If economic deceleration materializes in the first quarter of 2012, and developments in the foreign exchange market are translated in a stronger currency, a rate cut will definitely be on the table,” Lozano said.

To contact the reporter on this story: Jose Enrique Arrioja in Mexico City at jarrioja@bloomberg.net

To contact the editor responsible for this story: Jose Enrique Arrioja at jarrioja@bloomberg.net


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