Despite its efforts, Banxico doesn’t seem to be able to stop inflation from easing to 3.1% in the first quarter of 2024.
The Fed’s decision to hike by 50 basis points rather than 75 gives Mexico some breathing space since its policymakers began tightening much earlier, said Gabriel Lozano, chief Mexico economist at JPMorgan Chase & Co.
Banxico’s statement is likely to have a “hawkish bias” as inflation expectations fail to come under control, possibly with a split decision in the five-member board, he added.
“We could have a couple of dissenters — we think at least one with 75 basis points,” Lozano said.
What Bloomberg Economics Says
“Increasing US interest rates and a more hawkish Fed outlook raise concerns about potential capital outflows, weakening pressure on the peso, pass-through to inflation and financial stability. They support a bigger hike.”
— Felipe Hernandez, Latin America economist
Lopez Obrador announced an inflation pact with major businesses last week to keep prices under control. Economists welcomed the deal but don’t expect it to have a meaningful or lasting impact on inflation.
The bank will likely keep raising rates and could end the year at 8.75% — the highest level since it adopted the current overnight rate in 2008, said Gabriela Siller, director of economic analysis at Grupo Financiero BASE.
Source: El Financiero