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Banxico's Heath Says Nearing Terminal Rate, Between 10.75%-11.5%

MEXICO
  • In an interview with Bloomberg released yesterday, Banxico’s Deputy Governor Jonathan Heath says Banxico still needs to raise its key interest rate at least once more. The recent increases took borrowing costs closer to their so-called terminal rate, which “intuitively” may be between 10.75% and 11.5%, he said.
  • Regarding the terminal rate he said “I don’t see it above 11.5%, actually not even much higher than 11%, but that will depend on the data,” noting that his comments reflect his views alone and shouldn’t be considered the position of the bank’s five-person board.
    • “We could hold for a good part of the year, because we have to leave the monetary stance in restrictive territory”.
    • “If you leave the rate at, let’s say, 11% and expectations fall to 3%, you’ll have an immense real rate that is far, far more than needed,” he said. “We don’t want an overshooting and that could be a drastic overshooting. Therefore, that’s something that we need to be very careful with.”
  • A very quiet docket this week in Mexico with November retail sales scheduled on Friday.
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