Mexico: Banxico likely to hike by 25bps - TDS

Analysts at TD Securities suggest that they are expecting a 25bp rate hike to 8.25% of the overnight rate by Banxico today.

Key Quotes

“Nothing fundamental has improved enough with respect to the internal inflation complex, or external financial market conditions to sway Banxico away from what we believe will be further moderate tightening. Inflation outcomes in November were not entirely constructive, though we did see the Y/Y rate of inflation in energy costs drop, which is helping to take the pressure off of headline inflation both on a Y/Y and on a momentum basis. However, what is not as constructive is the continued upturn in near-term inflation expectations, with 12-month ahead expectations now back up at 3.9% Y/Y. This is given increased importance, insofar as its impact on wage-negotiation processes, by the somewhat worrying uptrend in core services inflation momentum. USDMXN trading into the end of the year above 20.00 leaves Banxico in a position where failing to hike would send the wrong message to markets.”