Mexico | Banxico is set to hold the policy rate steady

Summary

With falling inflation and a strong peso, we expect Banxico to start a rate cut cycle in 4Q23 to avoid an additional increase in the already very high ex-ante real rate

Key points

• Key points:
• Banxico will feel comfortable with peso’s strength even as expectations of some narrowing in the interest rate spread have built up
• The Board can focus on the evolution of inflation, which is set to decline fast in 2Q-3Q

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