Interest rates latest publications
Banxico raised the policy rate by 75bp to 7.75% and signaled that another hike of this size was possible at its next meeting, but also that a larger hike was unlikely
They will peak once the Fed is done tightening. Slowing demand to bring down inflation without significant pain is “not getting any easier”, but markets (still?) price in a soft landing.
We now expect more rate hike front-loading as the FOMC turns more hawkish following persistently high inflation readings from last week.
May 16, 2022
US | Treasury yields and interest rates will likely peak once the Fed is done tightening
Bringing inflation back down to target will likely cause “some pain”; yet, markets are (still) pricing in a soft landing. With the Fed set to hike rates by 50 bps in June and July, the tightening pace is set to be the fastest since the 1994-1995 hiking cycle.
We expect the Fed to hike the fed funds rate by 50bps and launch QT amid “much too high” inflation. The aim will be to bring inflation down while achieving a soft-landing of the economy.
Economic outlook with lower GDP growth, high inflation, and higher interest rates. A downward revision to our 2022 GDP growth estimate to 1.2% (2.1% previous) due to the continued weakness of domestic demand and the additional disruptions to global value chains driven by the Ukraine conflict.
The hiking cycle has much further to run, the question is whether Banxico will frontload the hikes or take a more gradual pace once core inflation starts to ease
The COVID pandemic resulted in an unprecedented collapse in both aggregate supply and demand for most of the world's economies.