The central bank of Mexico (Banxico) will announce its interest rate and release its policy statement on Thursday, December 17th. Markets expect Banxico to leave its policy rate unchanged at 4.25%. Previewing this event, “we expect Banxico to continue to hold on policy, as policy-makers gain confidence in the fading COVID-19 inflation shock and confirm general stability in inflation expectations,” said TD Securities analysts.
Key quotes
“MXN performance has supported Banxico’s easing stance, and the currency remains in the upper echelons of the EM yield complex. Continued stability should keep the door open to the prospect of further easing in 2021.”
“The rates market is pricing in the risk of 25bps of easing in 2021, which is in line with our view on the risk bias. However, we were surprised that Banxico decided to hold in November, and thus see no further cuts until a strong signal is evident from policy-makers.”
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