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Wells Fargo Expect Banxico To Be Cautious And Deliver “Hawkish Cut”

MEXICO
  • With inflation receding rather quickly and activity showing tentative signs of slowing, Wells Fargo believe Mexico's central bank will start cutting interest rates this week. They do, however, expect Banxico to be cautious and deliver a “hawkish cut” in an attempt to prevent renewed inflation pressures. In that sense, WF believe the official statement will refer to inflation risks still being tilted to the upside and caution being needed going forward.
  • In their view, Banxico acting cautiously likely means it delivers 25 bps of rate cuts at every meeting through the end of this year and a relatively hawkish message accompanying each cut.
  • For now, 25 bps reductions are the most likely path and hawkish rate cuts should prevent the Mexican peso from experiencing any outsized depreciation pressures. The peso remains one of the best performing currencies in the world, and in Wells Fargo’s view, hawkish rate cuts should not disrupt that trend.

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