MNI Banxico Review - May 2022: Opens Door to More Aggressive Policy
Hawkish policy statement adds upside risk to terminal rate
Banxico raised rates by a further 50bps to a new cycle high of 7.00% at the May meeting, alongside consensus. The bank also upped their inflation forecasts across the forecast horizon, but retained their view that convergence to the inflation target will occur in Q1 2024. The outside risk of a member voting for faster tightening materialized, with Espinosa opting for a 75bps hike at this meeting.
The accompanying policy statement was broadly inline with the release from March, with one notable exception. The bank added that they would consider “more forceful measures” to meet their inflation goals going forward – a hawkish addition to their language that raises the upside risk to the market’s terminal rate assumptions.