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Central Bank Commentary Underscores Split Views On Rate Hikes

MEXICO
  • Overnight, Banxico Deputy Governor Jonathan Heath described the current hiking cycle as "not over yet" in a Reuters exclusive. The central banker described one or two more hikes as likely amid continued anxieties around inflation, with the usual caveat of remaining data dependent.
  • Heath added that inflation will likely peak in February or March and start to decline in the second quarter of 2022 and reach the bank's 3% target in the third quarter of 2023.
  • Demonstrating the divided opinion among the governing board, Deputy Governor Esquivel (the lone dissenter at last Thursday's meeting) countered that interest hikes in the current context are "inefficient" and "can be counter-productive".
  • Esquivel reiterated his rationale that rate hikes may be interpreted as indications that the observed inflation has a relatively permanent character "to which an upward cycle of the interest rate would be responding."
  • The September CPI data will be published this coming Thursday, September 7. For reference, the next Banxico meeting will take place on November 11.

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