MNI China Daily Summary: Tuesday, December 10

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Mizuho Now Expect Interest Rates To Reach 9.0%

MEXICO
  • Mexico ́s central bank raised its policy rate by 50bp to 7.00% last Thursday, keeping the pace of monetary tightening steady as expected. The statement was hawkish, though, citing the resurgence of Covid cases in China as an additional inflationary pressure to the already challenging inflation scenario.
  • Headline and core inflation projections were again significantly revised upwards, although the bank continues to expect convergence to target to occur in 1Q2024. Importantly, the balance of risks for inflation remains tilted to the upside, Banxico said.
  • Lastly, the bank stressed that “more forceful measures” may be necessary to attain the inflation target, suggesting that the pace of rate hikes could increase.
  • Thus, the odds of a 75bp rise at the next meeting in June have increased considerably. As such, Mizuho now expect interest rates to reach 9.0% at the end of the current tightening cycle in September (75+75+50), up from 8.0% previously estimated.
  • As for the MXN, Mizuho continue to expect it to trade range bound, using 20.0 and 21.0 as the range parameters following last week’s Banxico meeting.
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