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Banorte on Quarterly Inflation Report: Expect To Maintain Hawkish Tone

MEXICO
  • Like previous reports, attention will centre on updates to GDP and other economic variables. It should be noted that the relevance of inflation forecasts within the document has decreased since they started to be updated in each policy meeting. Nevertheless, Banorte do not rule out a possible revision given recent dynamics, while being on the look for expanded comments about this. They expect the document to maintain a hawkish tone, similar to the last statement and minutes.
  • For 2021 growth, Banorte expect a 5.7% increase, below the mid-point for 2021’s estimate by the central bank standing at 6.2%. They continue to think that uncertainty prevails for industry, especially manufacturing, with reports that bottlenecks continue despite decreasing at the margin lately. In this sense, a downward revision for this year is practically a fact.
  • So far, inflation in 4Q21 has averaged 6.5% y/y. To reach the 6.8% average by the institution, this would have to come in between 7.1%-7.2% for the remainder of the period. In their opinion, this is quite feasible.
  • Banorte maintain their expectation of a 25bps hike in December, taking the rate to 5.25%. After this, we keep anticipating five 25bps increases in 2022, tentatively in the February, March, May, October, and December meetings with which the rate would reach 6.50% by end-2022.
  • However, considering some recent events, along relevant comments within the minutes, we consider that the possibility of a faster tightening cycle has increased. Therefore, we will be looking into clues in the release that could help validate or reject this scenario.
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