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GLOBAL POLITICAL RISK

Modi, AMLO Top Major Economy Leader Poll, Macron Last

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Trend Condition Remains Bearish

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  • Link to Banxico Minutes: https://www.banxico.org.mx/publications-and-press/...
  • Clear discussion on greater tightening both in terms of magnitude and tightening from one member's comments:
    • "One member mentioned that it is necessary to analyze whether a gradual approach is adequate, considering its lagged impact and its effects on inflation through the expectations channel. He/she highlighted that the discussion should focus on the persistence of high inflation, particularly of core inflation, in order to determine if convergence to the target will require a greater monetary policy tightening, both in terms of magnitude and timing. He/she pointed out that not acting in the face of a significant increase in inflation puts the anchoring of expectations and credibility at risk, which would not only make more difficult the attainment of the target, but also entail the enlargement of negative effects of shocks."
  • Another member:
    • "He/she argued that, based on available information and the foreseen trajectory for inflation, the monetary stimulus should be cut by 50 basis points. However, he/she pointed out that accelerating the pace in an environment of high uncertainty may have undesirable effects on markets."
  • Esquivel's note with his vote to hold:
  • "The current unprecedented economic context calls for a non-mechanical response. Many central banks are facing inflationary pressures, but most have opted for maintaining the monetary stimulus, acknowledging the inability to fight them with the available tools."