MXN: Expect Banxico to hike its Overnight Rate by 50bp to 4.75% - TDS

Research Team at TDS, expects Banxico to hike its Overnight Rate by 50bp to 4.75% in its policy meet today.

Key Quotes

“The Bloomberg respondents are evenly split between those expecting no change and those, like us, who expect +50bp.  Our indicators show that we are in a very similar MXN trading regime as was the case during Banxico’s previous two 50bp rate hikes earlier this year.

Given the extremely similar market conditions, we feel that a failure to hike would confuse the market as to Banxico’s reaction function, undermine confidence in policy makers, and send an adverse weakening impulse into MXN. This would eventually necessitate further (and potentially more intensive) market-stabilizing policy action.”