Free Trial
JGB TECHS

(H3) Extends Bounce Off Lows

USDCAD TECHS

Pierces The 50-Day EMA

US TSYS

Risk Buoyed Ahead Fed Blackout

NEW ZEALAND

Chris Hipkins Named To Succeed Jacinda Ardern As PM

AUDUSD TECHS

Remains Above Support At The 20-Day EMA

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

BBVA Say All Eyes On Tightening Cycle End Hints

MEXICO
  • Signs of a policy shift to a slower pace of hikes are possible but probably still unlikely, thus, all eyes will be on hints of what Banxico will be looking for in the data to slow the tightening pace and then end the cycle.
  • Core inflation has not yet started to soften and edged up in October. However, Banxico should take comfort that all the other core inflation components, aside from core food goods have stabilized.
  • With inflation set to soften ahead, the monetary policy stance will become much more restrictive fast. In BBVA’s view, Banxico should start decoupling from upcoming fed funds rate hikes (likely worth an additional 100bp). If Banxico matches future expected fed funds rate hikes, the real ex-ante would soar to 7.00%, an excessively tight stance in a context of waning demand and easing inflationary pressures.
  • Given that Banxico has yet to show that it is willing to let the interest rate spread narrow somewhat in the short term, BBVA think that the end of the tightening cycle is getting closer but that there is still additional tightening in the pipeline. In December, BBVA still expect them to match the Fed with a 50bp or 75bp hike.
198 words

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.
  • Signs of a policy shift to a slower pace of hikes are possible but probably still unlikely, thus, all eyes will be on hints of what Banxico will be looking for in the data to slow the tightening pace and then end the cycle.
  • Core inflation has not yet started to soften and edged up in October. However, Banxico should take comfort that all the other core inflation components, aside from core food goods have stabilized.
  • With inflation set to soften ahead, the monetary policy stance will become much more restrictive fast. In BBVA’s view, Banxico should start decoupling from upcoming fed funds rate hikes (likely worth an additional 100bp). If Banxico matches future expected fed funds rate hikes, the real ex-ante would soar to 7.00%, an excessively tight stance in a context of waning demand and easing inflationary pressures.
  • Given that Banxico has yet to show that it is willing to let the interest rate spread narrow somewhat in the short term, BBVA think that the end of the tightening cycle is getting closer but that there is still additional tightening in the pipeline. In December, BBVA still expect them to match the Fed with a 50bp or 75bp hike.