Mexico: Banxico to leave the policy rate on hold at 7.50% - Rabobank

Christian Lawrence, Senior Market Strategist at Rabobank, expects Banxico to leave the Mexican policy rate on hold at 7.50% today.

Key Quotes

“MXN OIS suggests a 25bp hike is fully priced in and the majority of analysts are also expecting a move. We sit in the minority with our call for no change in rates.”

“Price pressures continue to ease and although currency depreciation does pose an inflationary risk further out, pass-through has generally been slightly lower and taken longer.”

“We see risk of further MXN depreciation heading into the July 1st Presidential election regardless of rates and as such, we expect Banxico to keep its powder dry until after then.”

“We have long been expecting the recent sell-off in MXN and we continue to see room for USD/MXN to breach the 21 handle in the coming weeks as we head towards the election.”