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Scotiabank on Banxico: Upside Risk to Pace

MEXICO
  • Mexico is clearly a major oil producer and so higher prices can offer an additional positive income shock to the overall economy and with that an added inflationary impulse.
  • As such, higher oil prices could induce an incrementally hawkish central bank. This development arrives after it was revealed that Banxico board member Governor Victoria Rodriguez Ceja was leaning toward a large 75bps rate hike at the February 10th meeting.
  • Additionally, Deputy Governor Heath reiterated that Banxico is likely to once again hike at the same pace as the Federal Reserve going forward in order to relatively safeguard Mexican capital flows.
  • The combined developments could mean upside risk to the pace of monetary tightening that many expect.
  • For reference, the next Banxico meeting/decision is not until after the Fed meeting, scheduled for March 24.
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