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Goldman Sachs on Banxico Minutes Due Later Today

  • As in previous occasions and given the split vote, GS expect the minutes to show some dispersion of views among directors around the outlook for inflation, the effectiveness of rate hikes to tame inflation given the nature of the shocks to inflation, and, overall, the proper calibration of the monetary stance given the perceived balance of macro and financial risks.
  • Goldman Sachs will be looking for details on the following:
    • Whether one or more directors is of the view that if the inflation picture shows no improvement, or continues to deteriorate, the MPC may have to accelerate the pace of hikes (to 50bp) in order to anchor inflation expectations and limit second-round effects.
    • Discussion among directors about the relevance and implications for domestic monetary policy setting of the recent shifts in guidance and policy rate stance among a growing number of DM and EM central banks.
    • Discussion about the real business cycle dynamics, and outlook for the remainder of 2021 and 2022 given recent softness in coincident and leading indicators.
  • As a reminder, the forward guidance turned slightly more hawkish. The MPC stated that for the next policy rate decision it will evaluate "thoroughly" the "evolution of inflationary pressures as well as of all factors that impact the inflation forecasts and its expectations" in order to "set a policy rate" that is consistent at all times with the orderly and sustained convergence of headline inflation to the 3% target within the time frame in which monetary policy operates, as well as an orderly adjustment of the economy and financial markets.

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