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Heath Says Banxico To Use Fed Hikes As ‘Floor’ Going Forward

MEXICO
  • Comments from Banxico’s Heath overnight explaining the Fed’s hikes are likely to be Banco de Mexico’s “floor,” Heath said in a video interview on Monday with Bloomberg News.
  • Assuming the Fed only boosts its rate by a quarter point, Heath said he didn’t expect Mexico to hike by a half-point again in March.
  • Deputy Governor Heath reiterated that core inflation is still on a very clear upward trend, showing few signs of topping out. He expects March or April should be when the core readings peak.
    • “When the Fed increases we’ve always increased at the same pace or more, but never less, so I don’t really see the case for it to be different now,” he said. “What would make us try to go faster than the Fed is if we don’t see inflation peaking in March or April, maybe a little bit later -- that’s the type of data point I would be looking at.”
  • The explicit mention to the quarter point increase is interesting given some analysts are predicting another 50bp rate hike in March. While markets may adjust their probabilities of such action, domestic inflationary and Fed rhetoric/action becomes even more in focus.
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