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Goldman Sachs Expect Forward Guidance To Set High Bar For Sep 75BP Hike

MEXICO
  • Given the recent domestic and external macro-financial developments, the policy signals in the July 7 minutes and recent statements by several MPC members, Goldman Sachs expect the MPC to deliver another +75bp, driving the policy rate to 8.50%.
  • In their assessment, another 75bp rate hike is justified by the challenging current and prospective inflation outlook, further deterioration of short-, medium- and long-term inflation expectations, firm real GDP growth backdrop, improving labor market, and the FOMC 75bp hike on July 27. The July INPC inflation release on Tuesday morning (Aug 9) should not have a major impact on the MPC decision.
  • 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 (1H2024).
  • 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 signaling conditions/influences Banxico’ s short-term calibration of monetary policy.
  • Finally, Goldman expect the forward guidance to set a high bar for another 75bp hike at the Sept 29 meeting (i.e., to open the door for more moderate rate hikes until the end of the year).
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  • Given the recent domestic and external macro-financial developments, the policy signals in the July 7 minutes and recent statements by several MPC members, Goldman Sachs expect the MPC to deliver another +75bp, driving the policy rate to 8.50%.
  • In their assessment, another 75bp rate hike is justified by the challenging current and prospective inflation outlook, further deterioration of short-, medium- and long-term inflation expectations, firm real GDP growth backdrop, improving labor market, and the FOMC 75bp hike on July 27. The July INPC inflation release on Tuesday morning (Aug 9) should not have a major impact on the MPC decision.
  • 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 (1H2024).
  • 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 signaling conditions/influences Banxico’ s short-term calibration of monetary policy.
  • Finally, Goldman expect the forward guidance to set a high bar for another 75bp hike at the Sept 29 meeting (i.e., to open the door for more moderate rate hikes until the end of the year).