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Mexico: Banxico is still expected to keep rates stable throughout 2021-2022 – BBVA

By on May 14, 2021 0

Mexico’s central bank on Thursday, as expected, kept interest rates unchanged. Analysts in BBVA’s research department continue to expect Banxico to keep interest rates stable through 2021-2022, contrary to the more hawkish view of financial markets. They claim the central bank has become more concerned about inflation, but doesn’t seem overly concerned

Key quotes:

“Banxico’s board of directors has unanimously decided to keep the pending monetary policy rate at 4.0%, as expected by all analysts. In our opinion, the wording changes indicate a long pause, even due to the increased risks of inflation. Unsurprisingly, Banxico recognized both higher inflation and growing risks due to higher than expected inflation in April, as well as growing inflation risks stemming from the further increase in energy prices, rising costs and the first signs of rising relative demand as the economy gradually normalizes. “

“In our opinion, the Banxico board will not be in a rush to start a hiking cycle and are not overly concerned about inflation. We continue to expect Banxico to keep rates stable throughout 2021-2022, contrary to the more hawkish view of financial markets, which now expect a 25bp rate hike over the next nine months, as the odds of that hike happening in six months are now close to 50%. “

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