Roses Are Red Inflation Is Tame Payrolls Are Good But Risks Still Remain

January US data showed cooling inflation (2.4% y/y) but resilient payrolls, leading Natixis to push out its Fed rate cut forecast and shift to a tactical range-trading strategy in rates. In LatAm, Brazil's BCB is expected to cut in March, while Mexico's Banxico is likely to pause due to inflation stickiness.

Key Takeaways

• 1.US January inflation eased to 2.4% y/y, while payrolls surprised to the upside at 130k-172k, lowering immediate labor market fears.
• 2.Natixis has delayed its Federal Reserve rate cut call, with a March cut now considered unlikely due to strong headline labor data.
• 3.In Latin America, Brazil is expected to start a cutting cycle in March (50 bps), while Mexico is expected to pause due to sticky core inflation.

Table of Contents

• US Week in Review
• What to Watch for Next Week
• US Rates Strategy – Revisiting our views
• LatAm Highlights
• Brazil – Despite high(ish) IPCA, we still forecast a 50 bps cut in March
• Mexico - CPI for Jan will make it hard for Banxico to cut in March
• Peru - The BCRP kept the policy rate unchanged... again.

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