Banxico will keep rates at 8.25%. We still expect an unwarranted hawkish tone

We do not agree with Banxico’s overly hawkish tone; we think they should cut rates but they will not. We estimate the next move to be a cut, in September.

Key points

• Key points:
• In our view, the balance of risks to inflation is no longer tilted to the upside and, if not balanced, is tilted to the downside
• However, Banxico will continue to strike an overly cautious tone on Trump´s tariff threat, even in a context of a stable MXN that has recovered fully from the threat
• We still firmly believe that with falling inflation and a sharp deceleration in economic activity policy easing is warranted. Yet, we don’t expect it until 3Q19

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