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Banorte Says Factors Driving 75BP Hike Identical To September Meeting

MEXICO
  • Banorte expect Banxico to increase the reference rate to 10.00%, which implies a fourth consecutive 75bps increase, validating their expectation since late September. Factors driving the decision would be practically the same as in the last meeting, noting: (1) The relative monetary stance with the Fed; and (2) additional inflationary pressures.
  • A change of this magnitude would validate the view of a predictable and prudent central bank, which Banorte believe has been key to foster stability in local assets in an environment of higher global financial volatility. They consider that the vote will be unanimous.
  • Banorte believe the decision will reinforce the hawkish tone from the institution, despite the possibility of opening the door to a moderation in the pace and adjustments to the forward guidance, similar to the Fed. This would be consistent with the signals from members over the need to debate which the adequate level of the terminal rate and the space left to reach it.
  • In their view, this could indicate that future moves might be smaller. With this in mind, Banorte reiterate their call of a +50pbs hike in December, taking the rate to 10.50% at the end of the year, with an additional cumulative tightening of +50bpbs in 1Q23, resulting in a 11.00% terminal rate for this cycle.
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