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Banorte Expect Unanimous 25BP Hike, Maintain Hawkish Tone

MEXICO
  • In Banorte's view, investors will focus on: (1) The evaluation of inflation dynamics given the diverging trends between the core and non-core, as well as if they keep or not the balance of risks as tilted to the upside; and (2) possible changes to the guidance.
  • Regarding new deputy governor Mejia’s policy stance, Banorte believe he could tilt towards the center-to-hawkish side of the spectrum. Nevertheless, with further information to be seen in the minutes.
  • On inflation, the environment remains complex and full of uncertainty. Despite inflation in the 1st half of January having adverse seasonality, the rebound in services within the core was noteworthy.
  • Banorte still believe Banxico’s inflation path is very optimistic and do not rule out new upward moves in the core forecasts between 40-50bps, which would also more marginally affect the headline.
  • After this decision Banorte reiterate their view that tightening will continue at least for one more meeting. Specifically, they anticipate another 25bps hike in March, taking the rate to 11.00% which they see as the terminal rate of this cycle. Rate cuts could begin in 4Q23, penciling in two 50bps each in November and December, taking the reference rate to 10.00% by year-end.
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