Banxico likely to leave the policy rate unchanged - Rabobank

Christian Lawrence, analyst at Rabobank is expecting the Banxico to leave the policy rate unchanged at 8.25% today as the MXN OIS rates currently suggest no chance of a move and all of the 22 analysts surveyed by Bloomberg are also expecting a no-change decision.

Key Quotes

“Looking further out, the market is now implying two 25bp rate cuts by year-end taking the policy rate down to 7.75%. Our base case is that Banxico will cut rates in H2 but we continue to expect that slightly later in the year than the summer move implied by the curve.”

“We would also argue that the door is still open for a hike should MXN slump dramatically (which is not our base case). At the last meeting, Banxico highlighted the exchange rate, the Fed, economic slack and the Budget as key. The more dovish Fed certainly supports the view of no further hikes in Mexico.”

“We expect five 25bp rate cuts from the Fed in 2020, and we expect USD/MXN to continue trading an 18.88 to 19.50 range in the next 1-3 months.”