Rate Cut Before End-2011

BMI View: We are forecasting Mexico's central bank (Banxico) to cut the policy rate by 50 basis points before year-end, from 4.5% to 4.0%, as their focus switches from inflation fighting to a growth bias. We expect the policy rate to remain on hold at 4.0% on the back of concerns that another cut may negatively impact on the carry trade and jeopardise the health of the country's financial accounts, primarily funded through short-term money market flows.

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