Banxico to keep the Overnight Rate on hold at 7.0% - TDS

In line with the unanimous consensus, analysts at TDS expect Banxico to keep the Overnight Rate on hold at 7.0%.

Key Quotes

“While USDMXN has been relatively stable for a number of months now, CPI inflation, running at 6.66% Y/Y in August, has not yet peaked. However, we believe Banxico is likely to begin easing earlier and ease more rapidly than the market has priced, given our inflation forecast and the implications for the economically onerous surge in real rates that follows from market pricing-implied policy conservatism. We hold the view that the first 25bp rate cut will come in March 2018, followed by successive 25bp cuts to take the policy rate to 5.25% by year end.”