Economic Analysis - Monetary Tightening Coming To An End - APR 2017

BMI View: Mexico ' s central bank will continue to tighten monetary policy in the coming months in response to a sharp spike in inflation in January and the prospect of continued exchange rate volatility. However, we expect just one more 50bps interest rate hike to 6.75%, before disinflation and a strengthening peso will pave the way for the start of monetary easing in 2018.

  • Banxico will remain hawkish in 2017 on account of sharply higher inflation in H1 and persistent currency weakness.

  • Thereafter, slowing economic activity and a bottoming of the exchange rate will pave the way for monetary easing in 2018.

  • Banxico's Unwavering Commitment To Price Stability
    Mexico - Central Bank Policy Rate And Inflation
    Source: Banxico, BMI

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