Proceed with caution
The November Monthly Index of Economic Activity (IMACEC) confirmed that strength in October did not mark the start of a new trend. The pullback was broad-based, with commerce the lone exception, posting only a marginal gain. Our baseline for 2026 assumes GDP growth at slightly above 2%, broadly in line with potential.
Rising copper prices and the transition to a new government in March tilt risks modestly to the upside. The impact of higher copper prices on domestic activity should not be overread, and although the “animal spirits” channel could strengthen further, history argues for restraint.
After declining in November, imports recovered in December. Exports jumped, translating into an unusually large trade surplus, and a materially positive signal for the current account at year-end.
December CPI brought a mild —and noisy— downside surprise, bringing full-year inflation to 3.5%, the lowest December print since 2021. Core inflation measures were broadly stable in 12-month terms, reinforcing the view of a gradual disinflation process. The peso’s roughly 7% appreciation since mid-October has yet to be fully reflected in consumer prices, beyond faster channels such as those for gasoline, suggesting there is some additional disinflationary impulse still in the pipeline.
Our baseline continues to assume policy rate stability at 4.5%. Even so, the balance of risks has tilted more clearly toward an additional 25 bp cut, potentially as soon as March. The Central Bank could bring the Monetary Policy Rate (TPM) to the midpoint of its estimated neutral-rate range (3.75%–4.75%), but probably not below it. The first leg of the argument for an additional cut is the incoming CPI. The second leg is the currency value.
In our view, under the current macro scenario, 4.25% should be considered a floor. Currency shocks are often transitory, and the output gap remains slightly positive. In other words, the easing cycle is essentially complete. If anything, risks now lean toward the hawkish side: multiple sources of instability continue to resurface globally, while some local upside risks are emerging.
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