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Scotiabank Expect Banxico To Remain On Hold Next Week

MEXICO
  • Scotiabank note that the Banxico policy outlook is challenging, but given current heightened levels of uncertainty they think risk-reward favours prudence. They anticipate that Banxico will stand-pat at its policy-setting meeting next week, potentially in a unanimous decision. They keep a cut in September lightly pencilled in, and have a higher conviction for a 25bp cut in December, alongside the Fed.
  • Scotiabank think this would be a prudent path for the central bank, particularly given that Mexican market uncertainty could pick up as we head into the final stretch of the year. In particular, they see risks arising from the budget that will be presented by the government for 2025 with its potential changes to tax policy, and the reactions of rating agencies.
  • In addition, they see risks arising from the government’s constitutional reform package which could be submitted to Congress in that window. Finally, the US electoral process will be entering its final stretch, where Trump’s tariff proposals could also impact both rates (due to the impact of tariffs on inflation), and FX markets.

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