Banxico Stays On Hold

Mexico’s central bank has kept its monetary policy rate unchanged at 4.50%, as expected by the market. “For now, the permanence of a wide output gap and relatively contained inflation expectations (2010 year-end inflation expectations stand at 4.01% according to the central bank’s latest survey) allows us to anticipate that Banxico will extend the pause for the rest of 2009,” says Bank of America-Merrill Lynch. Meanwhile, Goldman Sachs says it will “maintain our forecast that Banxico will keep the [rate] unchanged at 4.50% for the foreseeable future. In addition, the risk to this forecast is unequivocally toward a hike, possibly as early as in Q1 2010.”