Banxico Preview – That’s all folks! – Rabobank

Analysts at Rabobank explained that they  expect Banxico to leave the policy rate on hold at 7.75% on Thursday, 4th October.

Key Quotes:

• “MXN OIS rates imply around a 30% chance of a 25bp hike while the Bloomberg survey of 25 analysts reveals that only three are calling for a move.
• If we are correct then it will be only the second time since the tightening cycle began in December 2015 that Banxico hasn’t followed a Fed hike with a rate increase.
• NAFTA risk has all but disappeared as the United States, Canada and Mexico finally reached a trilateral trade agreement that will be known as the USMCA.
• The main stumbling block is now the US congress but we expect the deal to pass whatever the outcome of the US midterm elections.
• MXN didn’t react much to the news as it ended Monday where it closed Friday and going forward we still expect USD/MXN to trade a 18.50-19.50 range in next couple of months.
• Our base case is still that 7.75% is likely to mark the peak of rates for this cycle but the risk remains skewed towards further tightening.”