Mexico: Banxico likely to leave the policy rate unchanged - Rabobank

Christian Lawrence, analyst at Rabobank, expects the Banxico to leave the policy rate unchanged at 8.25%, as do all of the 19 analysts surveyed by Bloomberg are expecting a no-change decision.

Key Quotes

“At the last meeting, Banxico highlighted the exchange rate, the Fed, economic slack and the Budget as key. The underlying economic backdrop in Mexico has developed in line with our expectations and our view on Banxico policy is broadly unchanged - we still expect an easing cycle to begin in Q4 of this year. That said, we now expect a 25bp‘insurance cut’ from the Fed in July (as well as the 125bp we were already expecting in July) and the odds of an earlier move from Banxico have risen.”

“Furthermore, if it becomes clear that the Fed is going to follow up with further cuts then we may need to add a‘follow-the-Fed’element to our projected Banxico policy rate path but this is not yet our base case. We expect USD/MXN to primarily trade a 19.10 to 19.40 range in the next 1-3 months.”