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BofA Forecast Back-to-Back 75BP Hikes From Banxico

MEXICO
  • Bloomberg have reported that Bank of America analysts believe Mexico’s central bank will deliver back-to-back interest rate hikes of 75 basis points and may even consider an intra-meeting borrowing cost increase in coming months as policy makers battle above-target inflation.
  • Banxico will raise rates to 9.5% this December, up from the prior forecast of 9%, BofA economists wrote in a note Thursday.
    • Never since starting their inflation-targeting regime in 2008 have policy makers lifted borrowing costs by more than half a percentage point.
  • “We do not discard an intra-meeting decision in the following months,” they wrote. “Banxico is trying to put the policy rate above neutral fast in order to lower core inflation and to prevent the peso from depreciating much vs the dollar, to avoid amplifying external price pressures.”
  • BofA also highlighted the relative calm in Mexico, describing the country as an “oasis” compared to other Latin American countries amid the lack of politically relevant events until the next presidential election in mid-2024.
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