Banxico might implement stricter measures to bring inflation back to its target levels

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Currencies in Latin America rose on Thursday, May 26th, with the Mexican peso strengthening for a third day after upbeat retail sales data even as the central bank meeting minutes highlighted persistently high inflation.

The peso gained 0.3% after data showed retail sales in Mexico rose 0.4% in March from February, and 3.8% from a year earlier.

“The strength of the Mexican peso is related to this sequence of positive activity data lately and really adds to the story that the Mexican economy started 2022 more positively than everyone expected, in spite of the tightening cycle by Banxico and the Fed risks that continue to accumulate,” said TS Lombard economist Wilson Ferrarezi.

“The problem is that the positive data will face significant downside risks in the coming months.”


Most of the Mexican central bank’s five board members believe the balance of risks for the trajectory of inflation has worsened again and remains biased to the upside, minutes from its latest monetary policy meeting showed.

“Banxico signaled in its statement that it might implement stricter measures to bring inflation back to its target levels,” wrote Commerzbank strategists in a note. “Quite a few market participants seem to expect a larger rate step in June.

That means a lot seems to have been priced in already, which is also reflected in the robust peso.” Mexico’s peso has added 3.3% this month, on track to erase all of April’s losses.

Source: El Financiero

Mexico Daily Post