CS Sees No Mexico Rate Hike

The market is betting on another 25bp rate hike from Mexico Friday, but Credit Suisse predicts that Banxico will wait. “We maintain our view that the central bank of Mexico (Banxico) is likely to leave the overnight rate unchanged at 7.75% in this Friday’s (18 July) policy announcement,” says Credit Suisse. “The central bank will choose to leave rates unchanged this time around and tighten instead by 25bp in the 15 August policy announcement,” it adds. The shop expects Banxico July 30 to raise its inflation forecast for Q4 by as much as 75bp, from 4.25%-4.75%, leading to pressure to continue to increase the overnight rate. “The central bank is not about to embark on a prolonged tightening cycle; instead, we see it choosing the timing of its rate hikes selectively,” says Credit Suisse. Thus Banxico would look to avoid signaling a long tightening cycle by sitting out an announcement.