World investors estimate that Mexico’s interbank funding rate may be between 8.25 and 9% by the end of this year in response to inflationary pressure and financial stress due to the normalization of rates in the United States. That’s how 25% of fund managers surveyed by Bank of America Securities (BofA-Securities) see it in its monthly survey.
The managers consulted do not rule out that Banco de México may take the rate even above 9 percent. 5% of those interviewed consider that it is possible to see a rate between 9.25 and 10%, and this is the first time that investors have taken their forecasts to these levels.
To ponder this forecast, it is enough to remember that the highest rate that Mexico has registered is 8.25% and it remained there for five months, between February and June 2019, in a strategy developed to soften the impact that inflation registered due to price liberalization. energy, the so-called “gasolinazo”.
The results of the April survey show that 10% of those interviewed consider that Banxico can take the rate to a level between 7.25 and 8%; 7% expect it between 6.5 and 7 percent.
This perception contrasts with the maximum expected the previous month, when they foresaw that it could reach a level between 7 and 7.25 percent.
The difference with the US
According to the results of the survey, the increase in rates in the United States is the greatest risk facing Latin American economies this year, but very close, with a minimal difference, they also identified the policies that are being applied in the region.
In a previous analysis, the chief economist for Mexico and Canada at BofA Securities, Carlos Capistrán, explained that Banxico will have to follow the Fed to keep the differential between federal funds and Mexico’s rates constant. This to mitigate the volatility of the exchange rate and keep inflation expectations anchored.
In the monthly survey among fund administrators, the proportion of managers who project that Mexico’s economic growth this year will be between 0 and 2.5% increased, where 40% of those interviewed agree, which doubles the 20% collected the previous month. .
15% anticipate that it will register a GDP performance between 2.5 and 5 percent.
75% of the sample anticipates that the Brazilian economy will register a growth between 0 and 0.25% this year, far from 50% of the fund managers consulted who had these same projections the previous month.
world recession alert
The investors consulted warned that inflation is “out of control” and could be the origin of recessions.
According to BofA Securities’ Head of Investment Strategy Michael Hartnett, price action in financial markets has been “recessionary-type”. This pointed to sharp declines in homebuilders, semiconductor manufacturers, retail and private stocks.
From their perspective, inflationary pressure will fuel the aggressiveness of central banks such as the Federal Reserve and they allude to the restrictive actions of the US central bank as the antecedent of recessive episodes.
alert positions
Most fund managers believe that global stock markets will enter a bear market this year as expectations for economic growth fall amid the war.
“Economic growth and earnings expectations are recessionary,” Michael Hartnett wrote in the BofA client note.
They also acknowledged that they increased their cash positions to the highest levels since 2018.