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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Banxico Preview - November 2021
Executive Summary:
- Analysts unanimously expect Banxico to continue their tightening cycle at the November meeting.
- However, given the persistent upward trajectory of inflation readings and the associated pressure on inflation expectations, opinions are mixed on whether the board should accelerate the pace of hikes.
- So far, consensus points toward another 25bp hike from 4.75% to 5.00% as the most probable outcome, with individual voting likely to come under particular scrutiny for assessing the future path of policy.
Click to view the full preview: MNI Banxico Preview - November 2021.pdf
Vote Splits In Focus Ahead Of Governorship Transition
Markets are expecting no issues with the Senate confirming former Finance Minister Arturo Herrera as the new Banxico governor, following his nomination by president AMLO. Analysts expect this to be completed before the end of Congress' ordinary session, currently set for December 15. Forecasters are paying particular attention to the vote splits at this meeting for hints on future policy, with many expecting the votes to be as wide ranging as on hold to a +50bps decision. As we approach the transition of Governors, it may place greater significance on Governor Diaz De Leon's vote as if he were to be the sole advocate for a 50bp move, it may be considered as less hawkish given the proximity to his departure. In contrast to this, if Deputy Governor Esquivel were to alter his vote to a hike, this might be considered a much more hawkish development.
Inflationary Pressures Persevere
October CPI data confirmed the ongoing upward trajectory for inflation in Mexico, with all readings printing above median surveyed estimates. Annual headline CPI rose to 6.24% versus a 6.19% estimate and up from 5.87% at the prior meeting. The reading shows CPI nearing on a four-year high and edging further above the ceiling of the 3.0% +/- 1 percentage point target.
Perhaps more importantly, core CPI has risen to 5.19% versus 4.92% at the September meeting. Having now risen above the 2017 peak for the metric, core CPI is now running at twelve-year highs. The persistence of these inflationary pressures, especially in core dynamics will likely fuel the debate among the board on whether to ramp up the pace of policy tightening.
MNI/Bloomberg
Furthermore, in the latest central bank monthly survey of economists, 2021 year-end inflation was raised to 6.60% from 6.26% while 2022 year-end inflation was raised to 3.93% from 3.84%. These findings were corroborated by the most recent Citibanamex analysts' survey where 2021 year-end inflation was raised even further to 6.70% from 6.50%. Both surveys evidence heightening risks to the price formation process (a regular topic highlighted in the monetary policy statements).
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.