Mexico | Banxico holds rates steady

Board members voted 4-1 to hold rates steady at 11.00%. The fact that the decision wasn’t unanimous came as a bit of surprise considering the recent peso weakening and that Banxico was set to revise up its short-term headline inflation forecasts.

Key points

• Key points:
• We fully agree with the dissenting vote amid a policy stance that is overly restrictive and unwarranted considering the inflation dynamics and expectations.
• Banxico continues to signal it will proceed with caution, but a less hawkish wording opens the door for a rate cut as soon as in the next meeting in early August.
• We expect that Banxico will cut the policy rate only twice this year by 25 bps each (in August or September, and November or December).

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