(Reuters) -Mexico’s annual inflation hit its lowest in more than two years ahead of a monetary policy decision on Thursday that is expected to leave interest rates at a cycle high as the consumer price index remains above target.

In Latin America’s second largest economy, 12-month headline inflation reached 5.18% in the first half of June, data from statistics agency INEGI showed, slowing further but far from the central bank’s official target of 3%.

The lowest since March 2021, the level overshot expectations of 5.30% in a Reuters poll of economists and reinforced bets the country’s monetary authority will keep its benchmark interest rate steady when it announces its next decision later on Thursday.

A rate cut remains unlikely after the Bank of Mexico, known as Banxico, paused a nearly two-year tightening cycle in May suggesting it might need to maintain rates at current levels for an extended period to bring inflation down to target.

Capital Economics’ deputy chief emerging markets economist, Jason Tuvey, said Banxico would “almost certainly leave its policy rate on hold” after the latest consumer price figures, adding he did not forecast a rate cut this year.

“The strong labor market and rapid wage growth mean that inflation … won’t return to Banxico’s 2-4% tolerance band until late-2024,” Tuvey said. “And with the Fed also continuing to strike a hawkish tone, we think that rate cuts in Mexico will not be delivered until early 2024.”

INEGI data also showed that annual core inflation, which strips out some volatile food and energy prices and has been a cause of concern for the central bank, slid to 6.91% in the first two weeks of June.

Analysts polled by Reuters had expected it to hit 7.02%.

On a fortnightly basis, headline consumer prices rose 0.02%, while core prices were up 0.11%, the statistics agency added, both also below market consensus.

With a “well-behaved currency and more benign inflation readings,” Itau BBA economists believe the central bank might kick-off an easing cycle as soon as the fourth quarter.

“In our view, the central bank will keep the policy rate on hold until board members are more comfortable with the disinflationary process,” they said. “(But) rate cuts are likely in the last quarter of the year.”

(Reporting by Gabriel Araujo Editing by Barbara Lewis and Mark Potter)

ZURICH (Reuters) -A group of Credit Suisse AT1 bondholders has filed a class action suit accusing former executives at the Swiss bank, including three past CEOs, of being responsible for the bank’s downfall.

A lawsuit filed in a New York court on Tuesday accused former bosses Thomas Gottstein, Tidjane Thiam and Brady Dougan, and several other executives of doing excessively risky trades to achieve high short-term returns and bonuses.

“Credit Suisse’s directors and senior executives, and the rotten culture they instilled and fostered, destroyed trust in the bank, which led to its collapse,” the lawsuit said.

The lawsuit also accused executives of “creating and perpetuating a culture at Credit Suisse that placed profits, excessive risk-taking, and self-dealing over sound risk management and compliance with the law.”

It did not specify the amount of compensatory damages the plaintiffs were seeking.

UBS, which earlier this month became Credit Suisse’s new owner following a government-engineered rescue in March, said it would not comment on the court case.

Representatives of Exos Financial, a financial firm founded and led by Dougan, did not immediately respond to an e-mail seeking comment, while the two other former chief executives could not be immediately reached for comment.

As a part of Credit Suisse’s rescue, Switzerland’s regulator decided to render around $18 billion of Credit Suisse’s Additional Tier 1 (AT1) debt worthless, which stunned markets and alerted litigators.

The deal upended a long-established practice of giving bondholders priority over shareholders in a debt recovery, triggering hundreds of lawsuits.

Last month, Switzerland’s Federal Administrative Court said it has received 230 claims against the country’s financial regulator FINMA after it wrote off the value of Credit Suisse’s AT1 bonds.

(Reporting by Noele IllienEditing by Tomasz Janowski)

By Davide Barbuscia

NEW YORK (Reuters) -A hawkish tilt from Federal Reserve Chair Jerome Powell hasn’t been enough to convince some investors that the central bank is unlikely to hold U.S. interest rates at elevated levels for much longer.

Testifying to U.S. lawmakers, Powell on Wednesday said the Fed had a “long way to go” in bringing down inflation to its 2% target and suggested the central bank may need to raise rates twice more this year – a message he also delivered at last week’s monetary policy meeting.

Powell’s comments did little to sway investors in futures markets tied to the Fed’s policy rate, which on Wednesday reflected bets for only one additional rate increase this year, followed by cuts in January. The Fed’s projections, by contrast, imply 100 basis points of rate cuts from a peak of 5.6% by the end of 2024.

“The market generally holds the view that the economy is set to slow, that the recessionary conditions that the consensus expects towards the end of this year and into the next will lead the Fed to ease monetary policy,” said Roger Hallam, global head of rates at Vanguard, who has been looking to add to positions in longer-term bonds.

Skeptical investors have cited a range of factors for that rationale, from the lag with which monetary policy tends to take effect to the warning emanating from some parts of the U.S. yield curve, which has been inverted over the last year and became even more so in recent days – a signal that has preceded recessions in the past.

The yield curve comparing two-year and 10-year notes was at negative 100 basis points on Wednesday – the most inverted it has been since the collapse of Silicon Valley Bank in March.

An inverted yield curve occurs when yields on shorter-dated Treasuries rise above those for longer-term ones. It suggests that while investors expect interest rates to rise in the near term, they believe higher borrowing costs will eventually hurt the economy, forcing the Fed to later ease monetary policy.

The 2/10 spread has inverted 28 times since 1900. In 22 of these instances, a recession followed, analysts at Commonwealth Financial Network said last year. The curve most recently inverted in March 2022.

Not all bond bulls necessarily believe a recession is coming. Yields on everything from Treasuries to corporate bonds are the highest they have been in over a decade, raising their allure to income-seeking investors despite the threat of more rate hikes from the Fed.

“With a steeply inverted curve we see a lot of yield and a lot of attractive opportunities in the front end,” said Steve Hooker, portfolio manager of Newfleet Asset Management. “But at the same time, we believe that the Fed are going to pivot to cutting rates at some point, even if that’s a 2024 event.”

Hooker has been adding to positions in longer-dated Treasuries and corporate bonds.

Of course, the Fed has been proven right on its projections so far this year. Expectations that the Fed would cut rates in the second half of 2023 were rapidly priced out of markets several weeks ago amid evidence that the U.S. economy remains comparatively robust in the face of the monetary policy tightening the Fed has already delivered.

Greg Peters, co-chief investment officer of PGIM Fixed Income, said inflation remained way too high to anticipate rate cuts any time soon.

“We’re not going out and adding duration here. We think it’s way too premature,” he said.

(Reporting by Davide Barbuscia; Editing by Ira Iosebashvili and Leslie Adler)