|

Mexico: Banxico to match the Fed with a 75bps rate hike next week – Wells Fargo

Next week the Bank of Mexico will have its monetary policy meeting. According to analysts at Wells Fargo, Banxico will follow the Federal Reserve with another 75 basis points rate hike,  brining the key rate to 10%.     

Key Quotes: 

“With the Federal Reserve maintaining its hawkish stance on monetary policy and lifting interest rates 75 bps, we believe the Central Bank of Mexico will match that pace of tightening next week. Historically, Banxico has followed Fed interest rate decisions, and we do not think a decoupling will materialize next week. For what it's worth, Mexican policymakers have commented that a decoupling could be warranted if conditions change. However, with Mexico inflation still running above target and the economy relatively resilient, conditions have yet to change, and a 75 bps hike is likely to be delivered by Banxico members next week.”

“A 75 bps rate hike would leave Banxico as one of the last Latin American central banks that have not pivoted to a less aggressive stance on monetary policy. Peer central banks have started communicating a slowdown in their respective tightening cycles, although Mexico policymakers have yet to take their feet off the brakes. This hawkish posture has supported the Mexican peso over the course of this year and has resulted in the peso being one of the few currencies to strengthen against the dollar in 2022.”
 

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

More from Matías Salord
Share:

Editor's Picks

AUD/USD eases from one-month high; holds above 0.7000 amid softer USD

AUD/USD pulls back slightly after hitting a fresh one-month high in the Asian session on Monday as bulls turn cautious ahead of the latest Australian consumer inflation figures and the crucial FOMC decision later this week. Meanwhile, expectations of another RBA rate hike in November support the Aussie. Moreover, a softer US Dollar helps the currency pair hold above the 0.7000 psychological mark.

USD/JPY extends recovery from one-month low beyond 157.00

USD/JPY kicks off the week on a positive note, building on Friday's modest bounce from the 156.00 neighborhood, or a one-month low amid some repositioning ahead of key central bank events and data risks. The Fed and the BoJ will announce their policy decisions on Wednesday and Friday, respectively. This, along with the release of Advance US Q3 GDP and the PCE Price Index on Thursday, should provide some meaningful impetus to the currency pair.

Gold struggles below $4,000 as oil-driven inflation fears reaffirm Fed hike bets

Gold attracts follow-through selling at the start of the new week, trading below $4,000 during the Asian session and near a three-month low. Higher energy prices continue to fuel inflation fears and reinforce US rate-hike expectations, undermining the non-yielding bullion. Bears, however, might refrain from placing aggressive bets ahead of the crucial FOMC meeting and other key central bank events this week.

Bitcoin slides below $80,000, Ethereum and XRP bears in control
Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) bears remain in control, extending losses on Monday after three straight weeks of declines. BTC slips below $80,000, while ETH and XRP follow BTC’s lead and trade lower at $2,315 and $1.30, respectively. The price action of these top three cryptocurrencies suggests weakening momentum indicators, raising the risk of a deeper correction.
CFTC Report: WTI rally runs ahead of positioning
The week in one sentence: WTI prices surged while speculative longs were cut in the week to October 20, creating the clearest price/positioning divergence. Sterling and the Canadian Dollar led the constructive currency shift, while Yen longs also rebuilt. Speculators turned less constructive on the WTI, reducing their net exposure to around 89.3K contracts.
What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.