Mexico Banxico Biding Its Time

Banco de México (Banxico) will release its quarterly inflation report on 19 May. Inflation has stayed well behaved – headline CPI is close to 3% while core rates have slipped to further below 3%, led mostly by non tradable/services pricing. Mexican peso (MXN) weakness has had a relatively minor impact, with currency pass-through concerns now largely dismissed. Recent Banxico communications show a neutral stance – inflation expectations are well anchored and growth broadly underwhelming (Q1 GDP data due on 21 May is likely to show sub-3% y/y growth). The major debate among Banxico board members is whether to pre-empt the Fed’s expected rate hikes. The cost of waiting for the Fed seems sufficiently low to make it the more practical course. “We think Banxico can afford to wait before raising the policy rate”, said Standard Chartered in a report on Monday.

The material has been provided by InstaForex Company – www.instaforex.com

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