Publications

The FOMC voted in a split decision (10-2) to keep the fed funds target range unchanged at 3.75–4.00%. We still expect a 25bp hike in December, when incoming data and updated SEP projections will test our baseline of unchanged rates through 2027.

We expect the FOMC to leave the fed funds target range unchanged at 3.75-4.00% this week, pairing the pause with a hawkish narrative as it seeks further evidence before deciding whether sticky inflation warrants lifting the fed funds rate beyond December

The reassessment of the policy outlook has pushed Treasury yields sharply higher, with the 10-year yield reaching around 5.3% as markets price in resilient growth: the rise in nominal yields has been almost entirely matched by higher real yields.

Banxico unanimously held its policy rate unchanged at 6.50% for a third consecutive meeting, maintaining its neutral tone but adopting a more cautious forward guidance. An orderly peso adjustment and minimal pass-through will be key as the rate spread narrows.

The FOMC unanimously raised the fed funds rate by 25 bps to 3.75-4.00%, underscoring its commitment to policy credibility. We expect only one additional 25bp increase, most likely in December. We then expect the Fed to remain on hold through 2027.

Headline inflation increased by 0.7 pp, to 4.3% year-on-year, while core inflation decreased by 0.1 pp, to 2.9%, in line with expectations. In September, headline inflation could rebound to 4.7%-4.9%, driven again by energy and, to a lesser extent, by food.

Treasury yields look to have stalled after July’s surge. It seems that softer-than-expected July data left markets hesitant to take a strong directional view before August inflation and employment figures arrive.