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Goldman Sachs on Banxico: 45% Probability Of A Bolder +50bp Move

MEXICO
  • GS expect the MPC to follow up with another 25bp rate hike to 5.25%. However, given the higher than expected Oct inflation print and upward move in inflation expectations, they assess a 45% probability of a bolder +50bp move, or up to two dissenting votes for a 50bp in case of a 25bp hike.
  • Weaker than expected Q3 real GDP growth, softening outlook for activity, the fact that the policy rate would already be at 5.25% (with a 25bp hike), and the upcoming transition at the helm of the central bank, will likely weigh on whether to accelerate the pace of rate hikes.
  • As in the previous meetings, GS expect the forward guidance to remain data-dependent and the MPC to continue to express discomfort with the short-term inflation dynamics, though expecting inflation to converge to the target by 2H2023.
  • As well as the decision itself they will be looking for implicit and/or explicit references to the depth of the current hiking cycle and how the approaching FOMC liftoff conditions Banxico’ s short-term calibration of monetary policy.
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