All surveyed analysts expect Banxico to raise the overnight rate by 75bps to 10.00% at the November meeting.
- All surveyed analysts expect Banxico to raise the overnight rate by 75bps to 10.00% at the November meeting.
- Continued upward pressure on core inflation and a willingness to match the Federal Reserve’s hawkish stance cement the need to maintain an aggressive pace of tightening at this juncture.
- However, given the most recent Banxico rhetoric, the statement will be closely scrutinised for any dovish signals that could pave the way for a deceleration in the hiking pace at coming meetings.
- Furthermore, a dissenting vote for a smaller hike at this meeting should not be ruled out.
Click to view full preview: MNI Banxico Preview - November 2022.pdf
Inflation Outlook Remains A Challenge For Central Bank Board
The latest bi-weekly print for the headline annual rate of inflation came in at 8.53%, slightly below both the prior reading of 8.64% and a surveyed median estimate of 8.62%. However, keeping pressure on the Banxico board, core CPI rose to 8.39% from 8.29%, extending the continuous uptrend for the metric. Processed foods remain as the main source of concern, although services also gathered momentum in the period.
Resilient MXN Counteracts Pressure On Committee
The Mexican peso remains one of the most resilient emerging market currencies and recent technical developments point to further potential weakness for USDMXN. While the hawkish stance of the committee remains a welcome tailwind for MXN, it also continues to benefit from an attractive carry profile and its limited exposure to activity wobbles in both Europe and Asia.
The pair last week cleared support at 19.7533, the Sep 12 low. The break confirmed the end of a period of consolidation that started mid-August. It has also confirmed a resumption of the downtrend that started on July 14. The immediate focus is on 19.4136, the May 30 low and then 19.2802, 1.00 projection of the Jul 14 - Sep 12 - Sep 28 price swing. Key short-term resistance has been defined at 20.1759, the Oct 19 high. Initial resistance is at 19.8170, the 20-day EMA.