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Citi Revise Call, Expect Banxico On Hold At 4% Throughout 2021.

MEXICO
  • Found multiple references in minutes to this being a "window of opportunity" for a cut, without any clear forward guidance. They believe the general rhetoric changed little even with the reconfiguration of the Board.
  • Saw multiple references to board members recognising the then-favourable macro-financial conditions, but also advising caution.
  • As expected, the minutes seem disconnected from the multiplicity of events that have roiled global and domestic financial markets in recent weeks, such as the increase in long-term rates, the FX depreciation, commodity price increases, gas shortages, among others.
  • In their opinion, even if market volatility diminishes over the next few weeks and the overall sentiment towards risk assets in the medium term remains relatively favourable, Banxico Board members will perceive heightened financial stability risks.
  • Think the window of opportunity to further cuts has now closed, citing USDMXN now nearing the 21 mark, Mexican long-term rates adjusting upwards by more relative to peers, and overall financial stability and inflation risks going up.
  • Some board members may continue quest for further rate cuts. However, global and domestic risks will take precedence.
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