MNI China Daily Summary: Wednesday, June 19

MNI BRIEF: Rate Changes Affect Eurozone More Than US Firms-ECB

MNI BRIEF: BOJ May Real Export Index Drops 1.4% M/M

MNI BRIEF: PBOC, MOF To Promote Treasury Trades Progressively

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CHINA PBOC CONDUCTS CNY278 BILLION VIA 7-DAY REVERSE REPOS WEDS

EZ/UK Bond Supply Calendar: Spain, France Auction on Thursday

EZ/UK T-Bill Calendar: 1/3/6-Month UKTB Auction on Friday

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RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

MNI: Growth Drag From Net Zero Carbon Goal Can Be Offset-OECD

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JPMorgan on Banxico: Believe The “Gradual” Approach Will Reign

MEXICO
  • This week’s monetary policy decision will be the last for Governor Díaz de León and probably his toughest. With rates now at 5%, Banxico is still facing important challenges, particularly after the latest relentless inflation print for November and ahead of the Fed’s hiking cycle that could start earlier than currently expected by our economists.
  • JPM believe these concerns will be evident in the statement of December 16 and are convinced there will be at least one dissenter in favour of 50bps.
  • More “aggressive” actions have been suggested by some members (Ms. Espinosa and Mr. Heath, most probably) but these should be balanced with the dovish view from Mr. Esquivel and the neutral speeches from Ms. Borja.
  • Still, JPM believe the “gradual” approach will reign, with ADL playing the complicated balancing act given his role as presiding board member. Indeed, if there is a tie between the 25bps advocates, and two pro-50bps hawks, the governor has the quality vote, and assuming he casts a steady-as-you-go vote, the policy rate will continue on its linear path going into 2022.
  • JPM do not rule out a 50bps surprise in the context of the FOMC decision on December 15 and given financial stability concerns that could accelerate in the context of institutional deterioration at the domestic level. Indeed ADL’s swan song could be a hawkish goodbye, but his well-crafted gradual approach in his tenure should prevail one last time.
  • JPM will revisit their rates path after this week’s actions from the Fed and Banxico.
  • Ms. Rodriguez underscored the importance of monitoring knock-on effects on inflation and of the autonomy of Banxico during her deposition in the Finance Committee of the Senate, but other than that, JPM know little about her policy bias.
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