Mexico: Banxico to continue to sound hawkish given inflation dynamics and rising US rates – TD Securities

On Thursday, the Bank of Mexico will announce its decision on monetary policy. Market consensus see a 25 basis points rate hike and also analysts at TD Securities. They see another hawkish statement coming from Banxico.

Key Quotes: 

“We expect Banxico to hike by 25bps and continue to sound hawkish given inflation dynamics and rising US rates. However, we also continue to expect to see the policy statement contain a dissent for a hold by two board members.”

“MXN's carry has helped it to rebound from bouts of weakness in 2021. However rising US yields will place an additional impetus on Banxico to ensure MXN short term yields remain competitive, in order to minimize the potential for MXN instability.”

“A hawkish bias is priced into rates into year-end, with some risk for a greater than 25bps rate hike. This remains the logical direction of risk in our view, but we continue to expect 25bps increments from Banxico.”