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Banorte Expect A Unanimous 25BP Hike From Banxico

  • Banorte expect a 25bps hike by the central bank, pushing the reference rate to 11.25%, in line with consensus. They also expect a unanimous decision, fulfilling the guidance of the previous statement that “…for its next policy meeting, the upward adjustment to the reference rate could be of a lower magnitude…”.
  • In their view, conditions have improved enough at the margin to justify this, especially inflation dynamics. Nevertheless, Banorte do not rule out one or two dissents from hawkish members, Deputy Governors Espinosa or Heath.
  • Banorte believe the tone of the statement could be less hawkish, awaiting evidence to decide upcoming actions and the possible terminal point of the hiking cycle, which they believe is very close.
  • The Board’s reaction function seems to be putting less weight to the Fed’s actions –especially when looked through the lens of the previous decision surprise. Notwithstanding this, it is their take that the latest 25bps hike from said institution will also help Banxico to reduce the pace.
  • All in all, and considering all available information, Banorte believe the central bank will avoid another surprise, especially as data supports a moderation in the hiking pace. Currently, they think this will not be the last increase. However, additional guidance in the statement and the related minutes regarding further actions would be most welcomed, particularly as the monetary policy outlook has become more uncertain worldwide.

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