Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI Banxico Preview - June 2022: Matching The Fed
Executive Summary
- Banxico are expected to raise rates by 75bps from 7.00 to 7.75% at the June meeting.
- This outcome is expected by all surveyed analysts and would be in line with the central bank’s most recent guidance.
- Continued pressure on core inflation alone may well have justified the more aggressive action, however, a more hawkish Federal Reserve has all but cemented the prospect of Banxico increasing their pace of tightening.
- Beyond the rate decision, market participants will be particularly attentive to the vote split and whether the statement provides any signalling for future decisions and the potential depth of the hiking cycle.
Click to view the full preview: MNI Banxico Preview - June 2022.pdf
More Forceful Measures
In May, alongside the central bank hiking rates by 50bps, the outside risk of a member voting for faster tightening materialized, with Deputy Governor Espinosa opting for a 75bps increase. While she remains the most hawkish member of the committee, it was the statement that provided the first clues that bolder action may be in the pipeline. The bank added that they would consider “more forceful measures” to meet their inflation goals going forward – a hawkish addition to their language. While some forecasters expressed the greater probability of a 75bp hike in June, others more simply noted the upside risk to the market’s terminal rate assumptions. However, speculation quickly became consensus as developing central bank communication moved the dial.
Inflation Outlook Remains Challenging
Despite the headline annual rate of inflation printing 7.65%, below the prior reading, the data remained marginally above estimates with core readings again surprising to the upside. Additionally, there has been a further deterioration in inflation expectations. Within the May central bank survey the median expectation for end-2022 core inflation rose +38bp, to 6.38%. The headline inflation forecast for year-end 2023 rose +21bp, to 4.34% (with core +14bp, to 4.14%), adding further evidence of a contamination to the medium-term.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.