Mexican Peso could come under pressure on signals of imminent rate cuts – Commerzbank

Bank of Mexico's monetary policy decision is due out today. Will the Banxico signal a turnaround? Economists at Commerzbank analyze how the Mexican Peso (MXN) could react to Banxico’s announcement.

Banxico is likely to take a wait-and-see approach

Banxico is likely to take a wait-and-see approach today. After all, it is unlikely that it would have delayed the first rate cut for all these months to bring inflation under control in the long term and then initiate a turnaround at a time when the overall rate is rising again. Even if this is not a general exclusion, I can't imagine that Banxico would want to do this. It would also put pressure on the Peso.

The more important question is whether it will hint at a first rate cut in March. After all, the real economy is now showing clear signs of the impact of high interest rates. Depending on whether there is more or less evidence today that rate cuts are imminent, the Peso could come under pressure.

But even if there are no hints, a first rate cut in March does not seem unlikely at the moment, given the developments in core inflation and the slowdown in economic growth. Unless, of course, inflation gets out of control again.