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Sacha Tihanyi, Deputy Head of Emerging Markets Strategy at TDS, notes that Banxico has hiked 25bps to 7.75% yesterday, in line with their and the consensus expectation, though a not-insubstantial proportion of economists saw the potential for a 50bp hike.

Key Quotes

“Less certainty over inflation convergence to target due to MXN depreciation, enhanced by uncertainty surrounding NAFTA and the Mexican election, was the key driver.”

“Our base case is that Banxico will now remain on hold before easing in December, however the risk to this view is a potential future (and substantial) MXN-weakening shock due to political/NAFTA uncertainty, which will likely force Banxico to respond with further tightening.”