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JPMorgan on Banxico minutes: See Rates at 5% by November.

MEXICO
  • The repetition of a divided 3-2 vote sparked some doubts in terms of the space left to hike in the coming months (and in 2022).
  • The statement on August 12 continued to emphasize the transitory nature of some shocks, but underscored upside risks to inflation in an uncertain scenario, so JPM expect the minutes to elaborate on both. Each of the dissenters will elaborate on their main reasons for voting for no hike, which will be crucial to understand what lies ahead, particularly considering cross-currents in inflation dynamics and the fact that the Fed's is expected to announce its tapering sooner rather than later.
  • In their view, Banxico's inflation path is consistent with back-to-back hikes in September and November, but this is subject to uncertainty, particularly related to services inflation.
  • The confirmation of easing pressures on non-core prices and diminished knock-on effects in the next couple of months could result in a gradual dovish shift by the board or even an on-hold decision in November, but for the time being, JPM expect hawkish sentiments to dominate, and this week's minutes should support that call.
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