LatAm Macro Semanario Banxico, BCB minutes, Colombia election aftermath

Research evidence excerpt

LatAm Macro Semanario Banxico, BCB minutes, Colombia election aftermath

for inflation is a

precursor to the central bank keeping the policy rate unchanged starting in the August meeting.

On Wednesday, the focus will shift to the IPCA-15 print for June. We forecast a mid-month inflation of

0.45% m-o-m (0.62%, previously), which would move y-o-y inflation from 4.6% to 4.8% between May and

June. We’re looking for a softer contribution from gasoline prices, food, electricity bill and health insurance,

the main inflation drivers in the previous month. On Thursday, we expect the national unemployment rate

to edge down to 5.6% in May, from 5.8% previously, reinforcing the picture of a still-tight labour market.

Taken together, a resilient labour market backdrop, alongside sticky inflation, should keep the bar high for

further easing. BRL may not benefit from this higher rate outlook given shifting polling dynamics for the

October election.

In Mexico, Banxico will announce its fourth monetary policy decision of the year on 25 June. We expect a

unanimous decision to keep the benchmark rate unchanged at 6.5%. This potential outcome would be in

line with our and consensus forecasts, as well as with what the market is fully pricing-in. Hence, we expect

a muted reaction from markets after the announcement. Unlike previous decisions, this announcement will

be a non-event for markets, as guidance will likely remain unchanged too (see Banxico Preview: Expect

unchanged rates and guidance, 22 Jun).

Before that, on 24 June we will know the CPI print for H1 June and the economic activity index for April.

With respect to the former, we anticipate modest increases in both core and non-core components,

resulting in a moderate expansion of the headline metric.