Should Banxico hold the policy rate steady, reacting to a temporary rise in inflation?

Summary

We stick with our call of a 25bp rate cut to 3.75%, but the odds became closer, 60-40 leaning to a cut in our view. The MPC should not react to temporary increases of inflation, already acknowledged in its communication and expected by everyone (ie, markets and analysts).

Key points

• Key points:
• A majority of analysts still expect the next movement of the monetary policy rate to be a rate cut to 3.75% this Thursday
• Arguments for the MPC to keep the policy unchanged are not solid in our view
• Still, we think that the odds of a hold are not low (40%)

Geographies

Topics

Tags