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Expect Banxico To Maintain Same Spread To The US Fed Fund Rate

MEXICO
  • Barclays expect Banxico to hike 75bp to set its policy rate at 7.75%. Such increase would maintain the same spread to the US Fed fund rate and be consistent with some concerns across the board on inflation being persistently high, which in turn threaten expectations.
  • In fact, although inflation during this quarter has performed similar to Banxico’s latest estimates, they might update the following quarters and forecast a slower deceleration.
  • Barclays see a high likelihood that this decision might be unanimous as we do not expect board members to actively consider the option for a higher hike of 100bp as there is no urgency to increase relative position given MXN has depreciated only moderately and capital outflows have not accelerated.
  • Finally, the statement might highlight tighter external conditions as a driver to this decision, which would be consistent with Barclays’ view that it will continue to mirror the Fed.
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