Benito Berber, Research Analyst at Nomura, suggests that they expect the central bank of Mexico (Banxico) is likely to leave the policy rate unchanged at 7.50% at today’s meeting.
“If MXN depreciates above 20.50 it may leave Banxico with no option other than to increase its policy rate. That said, we think the rate decision is difficult to assess; thus we assign a 60% probability to the scenario of no change and 40% to the scenario of a 25bp hike to 7.75%.”
“We maintain our stance that Banxico will commence an easing cycle in H2 after NAFTA 2.0 has been approved ‘in principle’ and once the 1 July elections have passed, but acknowledge that in a strong dollar regime it might not have room to ease the policy rate.”
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