Mexico: Banxico expected to hike by 25bp - Nomura

Banxico is scheduled to meet on Thursday and analysts at Nomura expect a 25bp hike to 8.0%.

Key Quotes

“Since the last Banxico meeting, inflation has not moved significantly (headline has remained unchanged at 4.90% y-o-y and core has risen to 3.73% from 3.63%). Growth recovered (0.9% q-o-q in Q3, after -0.2% in Q2), even if the output gap is still generally balanced, in our view. Importantly, however, USDMXN has moved to around 20 from around 19.”

“In addition, the latest developments on the policy front from the incoming AMLO administration have also been less than optimal, in our opinion – including the cancelation of the Texcoco airport project and the recent reports of interventionism in the banking sector.”

“We highlight that within the (plentiful) hawkish elements in communication Banxico added “greater-than-expected levels of public expenditure” as a risk to inflation. Thus, government policy-making is very much in the Banxico picture. Under these conditions, we believe a hike to 8.0% is more likely than not at this point.”