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- USD/MXN: Banxico’s unchanged approach constitutes the foundation for continued Peso strength – Commerzbank
USD/MXN: Banxico’s unchanged approach constitutes the foundation for continued Peso strength – Commerzbank
Economists at Commerzbank analyze MXN outlook following Banxico’s monetary policy meeting.
Banxico maintains underlying hawkish approach
The Mexican central bank’s (Banxico) unchanged approach constitutes the foundation for the continued Peso strength around 17.00 in USD/MXN.
As expected, Banxico left its key rate unchanged at 11.25% and continued to point out the upside risks for inflation. That makes it clear that it wants to avoid any speculation about the start of rate cuts in view of a significant fall in inflation to 4.8% recently (core inflation at 6.5%). Instead, it underlined in its statement that it is necessary to keep the key rate at the current levels for a prolonged period of time.
We continue to see a chance for a first rate cut at the end of the year. The expected fall in inflation will continue to improve real interest rates until then, which fundamentally supports the MXN's strength.
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