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%.
“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.”