MNI Banxico Review - May 2021: Inflation Risks Tilted Upwards

The full review with analyst views can be found here:

MNI Banxico Review - May 2021.pdf

Executive Summary:

• Banxico kept the overnight rate unchanged at 4.00% in a unanimous decision. The decision was in line with all surveyed analysts.
• Revisions to both headline and core inflation forecasts are above the last Quarterly Report for the short term.
• The board have acknowledged that inflationary risks are now tilted to the upside.
• This was highlighted by an addition to the list of upward risk factors: the 'persistence of core inflation'.

Key Takeaways:

• The Central Bank appear very much in wait-and-see mode. Inflationary pressures have been recognised, however, are still believed to be transitory with an eventual convergence to target.
• The minutes for the meeting may provide some crucial clues as to individual stances within the committee. Previously, three members did not see 4% as the low point for the easing cycle and if these opinions have been altered, current market pricing for tightening later in 2021 may become more justified.