Banxico expected to hike rates this week – Rabobank

Strategist at Rabobank Christian Lawrence sees the Mexican central bank tightening it monetary stance further at its meeting later in the week.

Key Quotes

“Banxico will announce the latest Mexican policy rate decision on Thursday 9th February and we stand in line with the consensus in calling for a 50bp hike to 6.25%. There are a small minority of analysts calling for a smaller 25bp move and that is where the risk lies to our forecast. As it stands, we expect a 50bp hike this week and a further 50bp of tightening by year end taking the policy rate up to 6.75% heading into 2018”.

“Market pricing looks to favour a 25bp move and we certainly have some sympathy with this, particularly given the recent respite in MXN selling, the change of plan with respect to gas price hikes and the removal of some market implied Fed tightening from the US front-end. Indeed, although these factors have certainly reduced our conviction of a 50bp hike and increased the risk of a smaller 25bp move, we maintain the view that the Bank will use this opportunity to extract the most “bang for its buck” in terms of supporting MXN”.