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On Thursday, the Bank of Mexico unanimously decided to keep the key interest rate on hold at 4.0%. Analysts at the Research Department at BBVA point out that wording changes signaling a significant and unanimous change of sentiment within the Board, clearly signal that Banxico has moved from a dovish bias to a cautious approach.

Key Quotes:  

“The easing cycle is done; the next movement will likely be a hike, but will not take place anytime soon and will be driven by the Fed.”

“A unanimous shift from dovish to cautious within the Board is evident; the easing cycle is done, but Banxico will not start to remove its accommodative stance anytime soon.”

“The latest inflation data was likely going to mark the end of the easing cycle. The statement confirms this expectation, and in our view, clearly signals the end of the easing cycle.”

“Banxico’s Board will not be in a rush to start a hiking cycle. We expect Banxico to leave the policy rate unchanged the rest of the year and throughout 2022, this contingent on the Fed also staying in pause until 2023.”