Banxico raised the policy rate 25bp to 4.75%, as widely expected by traders and analysts. USD / MXN continues to trade north of resistance at 20.50 as US stocks remain under pressure, but Rabobank economists expect the pair to return to the 20 handle in the coming weeks.
Upward revised CPI inflation forecast
“Banxico raised the policy rate 25bp to 4.75% as expected by traders and analysts.”
“CPI 2021 inflation is now expected at 6.2%, up from the projection of 5.7% in August. Considering the upward revision of inflation forecasts and the change in voting pattern, it is easy to argue that this meeting marks a step forward in hawkishness. We would agree, but there is an important caveat and that is the slowdown that we are seeing in activity. “[UpinhawkishnessWewouldagreebutthereisanimportantcaveatandthatistheslowdownweareseeinginactivityâ€[upinhawkishnessWewouldagreebutthereisanimportantcaveatandthatistheslowdownweareseeinginactivityâ€
“We have changed our forecast for further tightening and now expect two more 25bp rate hikes this year, bringing the key rate to 5.25% by 2022. We left our final rate forecast unchanged at 6 , 00%.
“Part of the decline in US stocks is directly due to the rise in US rates, the mechanical impact of higher discount rates combined with the sensitivity of the growth and tech sectors driving the S&P 500 down. , the rise in US rates weighs on the attractiveness of MXN. Having said that, we expect to see another rally in risk which should take USD / MXN back to the handle of 20. â€