MXN: Banxico weighs tactical hike to keep FX-related price pressure in check - ING

Sandeep Kanihama FXStreet Contributor

ING’s Gustavo Rangel expects Banxico’s new Governor Diaz de Leon to begin his tenure at the helm of the monetary authority with a rate hike.

Key Quotes

“Authorities have grown more concerned with the inflation outlook given the persistence of price pressures seen recently and potential for further FX weakness in the near-term, amid NAFTA and electoral uncertainties. Banxico’s board has also become more concerned about keeping the US/Mexico interest rate differential intact.”

“Lastly, burnishing Banxico’s inflation-targeting credentials, after Carstens departure, is another tactical consideration that could play a key role in the bank’s decision-making this week. MXN may find some temporary reprieve from any rate hike – but we note (a) the TIIE curve is pricing in a 25bps hike in 3M; (b) NAFTA is a key driver. Move above 19.00 looked inevitable; a run-up to 19.40 highly likely now.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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