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Goldman Sachs on Tomorrow’s Banxico Minutes

MEXICO
  • Goldman Sachs expect the minutes to show that directors remain highly concerned with inflation, particularly core, and the observed further deterioration of inflation expectations.
  • However, some directors may express concern with the weak growth backdrop (further widening of the output gap in 2H2021) and push back against continuing to hike at the recent 50bp pace given the current level of the policy rate (6.00%) and the implications for the domestic monetary policy stance of the fast approaching FOMC policy normalization cycle.
  • As in previous occasions and given the split vote, GS expect the minutes to show some dispersion of views among directors around: (1) the outlook for inflation, (2) the effectiveness of rate hikes to tame inflation and anchor expectations given the nature of the shocks that have affected inflation, and, (3) the proper near-term calibration of the monetary stance given the perceived balance of macro and financial risks and approaching FOMC liftoff.
  • In the minutes GS will be particularly attentive to:
    • Signals on how the MPC plans to calibrate policy going forward vis-à-vis the FOMC and any 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 2022 given recent softness of activity indicators.

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