On Thursday, the Bank of Mexico will have its board meeting. According to the Research Department at BBVA, the central bank will keep rates unchanged at 8.25% and will likely strike a dovish tone to signal that an easing cycle is about to start.
Key Quotes:
“Larger cuts and a faster easing pace at the start of the upcoming cycle are arguably warranted, but Banxico will likely remain cautious as it gauges the effect of a less restrictive stance on the MXN and as some Board members were not, until very recently, convinced about the need to start an easing cycle.”
“It will likely be a close call, but we think Banxico will hold rates at 8.25% on Thursday”
“The wording of the statement will reveal a dovish shift on the Board with a very weak economy and falling inflation”
“We continue to expect Banxico to cut its policy rate by 25pb in September and again in December; we have penciled in 100 additional bp of cuts in 2020.”
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