2 Feb 2015
Further easing by Banxico almost ruled out – TDS
FXStreet (Edinburgh) - Strategist at TD Securities Cristian Maggio does not expect the Banxico to ease further following its recent meeting, when it left the benchmark rate intact at 3.0%.
Key Quotes
“Banxico sees the need to closely monitor the evolution of all the determinants of inflation and inflation expectations, in particular monitor monetary policy in the US that should lead to the Fed tightening in 2015, with the related impact on the peso”.
“In conclusion, we think that a scenario in which Banxico cut rates would be possible only in the event of Fed tightening being put off indefinitely”.
“Based on our Fed forecasts, we think that risks continue to be skewed to the upside, as Banxico is more likely to respond to Fed hikes with their own hikes, and perhaps add a little more policy tightness to it”.
“Accordingly, we forecast 75bp of hikes from Banxico in H2 2015. The market, which was priced for modest chances of cuts until recently, seems to have converged towards our view now”.
Key Quotes
“Banxico sees the need to closely monitor the evolution of all the determinants of inflation and inflation expectations, in particular monitor monetary policy in the US that should lead to the Fed tightening in 2015, with the related impact on the peso”.
“In conclusion, we think that a scenario in which Banxico cut rates would be possible only in the event of Fed tightening being put off indefinitely”.
“Based on our Fed forecasts, we think that risks continue to be skewed to the upside, as Banxico is more likely to respond to Fed hikes with their own hikes, and perhaps add a little more policy tightness to it”.
“Accordingly, we forecast 75bp of hikes from Banxico in H2 2015. The market, which was priced for modest chances of cuts until recently, seems to have converged towards our view now”.