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Goldman Sachs: Banxico To Leave Door Open To Taper Hiking Pace In Dec

MEXICO
  • Given the recent domestic and external macro-financial developments, and the policy signals and balance of views in the Oct 13 minutes, Goldman Sachs expect the MPC to deliver another +75bp hike, driving the policy rate to 10.0%.
  • In their assessment, another 75bp rate hike is justified by the still challenging current and prospective inflation outlook, further significant deterioration of short-, medium- and long-term inflation expectations, firm real GDP growth backdrop (higher-than-expected above-trend real GDP print in Q3), improving labor market, and the FOMC 75bp hike on Nov 2 and guidance suggesting a longer cycle with a higher Fed funds terminal rate.
  • GS expect the forward guidance to remain data-dependent though conservative and the MPC to continue to express clear discomfort with the short-term inflation dynamics and to expect headline and core inflation to converge to the 3% target only by the end of the relevant horizon for monetary policy (2H2024). GS also expect the forward guidance to leave the door open to taper the pace of rate hikes at the Dec 15 meeting.
  • As well as the decision itself GS will be looking for implicit and/or explicit references to the depth of the current hiking cycle and how the FOMC policy stance and signalling conditions/influences Banxico’s short-term calibration of monetary policy.
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