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.
Banxico Review - November 2021
Executive Summary
- Banxico's governing board decided to hike the overnight rate by 25bps to 5.0%, in line with the majority of surveyed analysts, but less than market pricing ahead of the decision.
- The board voted 4-1 in favour of the 25 basis point hike, with Deputy Governor Esquivel the sole dissenter once more, voting to keep the key rate on hold at 4.75%.
- With some analysts forecasting an acceleration in the hiking pace, and others highlighting significant risks to more aggressive tightening, markets immediately interpreted the decision as dovish.
- However, inflation forecasts were revised higher and hawkish messaging remains throughout the statement and some analysts have factored in further hikes in 2022 to their base case scenarios.
Click to view the full review: MNI Banxico Review - November 2021.pdf
The statement describes the shocks that have increased inflation "are largely considered to be transitory". This compares to the September statement where the same shocks were "expected to be transitory". Additionally, the board describe the transitory horizon as "unknown" and the shocks "of considerable magnitude" which are both new.
Despite pointing towards the increasing pressures and potentially alluding to there being no plans to pause the current policy tightening schedule, the 25bp hike with Esquivel's dissention were interpreted as dovish to market pricing, causing a relief rally in the front end of the curve and some immediate pressure on the currency. USDMXN rose from 20.50 to 20.65 and gradually closed in on the daily highs of 20.6888.
Analysts have however, interpreted the statement/forward guidance as more hawkish with some adjusting their calls for extended tightening in 2022 to anchor expectations with one analyst pointing out there is not a zero probability of a 50bp hike in December given the huge uncertainties surrounding price formation.The complete set of revised inflation forecasts were set out in the following table within the statement:
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.