The larger-than-expected fall in Mexican inflation in March, to 3.3% y/y, should ease near-term concerns at the central bank about the impact of the fall in the peso on prices. More importantly, with the economy likely to enter a deep recession due to the coronavirus and the government seemingly doing little to help, interest rates are likely to be lowered sharply. We have pencilled in 200bp of cuts this year (to 4.50%).
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