Mexican Peso: Banxico stance keeps bar high for hikes – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad reports that Banxico left its policy rate at 6.50% for a third consecutive meeting and removed prior guidance to keep it fixed, while stressing it does not need to match expected Federal Reserve hikes.
Mexican central bank Banxico maintained its policy rate at 6.50% for the third consecutive meeting, abandoning earlier guidance to keep it fixed. Banxico's decision suggests that the bar for future rate hikes remains high, provided Mexico's inflation aligns with the bank's forecasts. The bank emphasized that it does not need to mirror expected Federal Reserve rate increases.
Despite a narrower US-Mexico rate differential, positive real yields and Mexico's external environment bolster the peso's value. The swaps curve forecasts approximately 125 basis points of tightening over the next year.
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