RBC and Commerzbank Views On Today's Banxico Decision

Couple More Sell-Side Views On Today’s Banxico Decision:

• **RBC think Banxico will not surprise for a second time in a row and will deliver a 25bps hike that is already priced in the TIIE market. But the balance of risks has significantly shifted towards lower rates. Mexico has clearly defined links with US credit conditions, so Banxico will likely need to calibrate the monetary policy path. Thus, RBC believe the CB will deliver a dovish hike and signal the end of the cycle.
• **Commerzbank: With a view to core inflation standing at just above 8% Banxico remains on alert and even if it should signal an imminent end to the rate hike cycle (we assume that it will be non-committal about its forward guidance this time), it is likely to keep the door open for further rate hikes if new upside risks for inflation emerge.
  • That means that Banxico should continue to lean towards the hawkish side. Whether the peso will be able to benefit will depend on the developments in the US over the coming weeks though.
  • Of course, the Banxico and the relevant authorities keep underlining that they do not see any risk of contagion for the well-capitalised Mexican banking sector as a result of the nervousness in the US banking sector. However, that is not necessarily required to affect the outlook for the peso.