Mexico: Banxico suggests a one-off hike for now - TDS

Sacha Tihanyi, Deputy Head of Emerging Markets Strategy at TDS, notes that Banxico has hiked 25bps to 7.75% yesterday, in line with their and the consensus expectation, though a not-insubstantial proportion of economists saw the potential for a 50bp hike.

Key Quotes

“Less certainty over inflation convergence to target due to MXN depreciation, enhanced by uncertainty surrounding NAFTA and the Mexican election, was the key driver.”

“Our base case is that Banxico will now remain on hold before easing in December, however the risk to this view is a potential future (and substantial) MXN-weakening shock due to political/NAFTA uncertainty, which will likely force Banxico to respond with further tightening.”