10 Mar 2015
MXN expected to pick up pace post-Fed’s hike – Scotiabank
FXStreet (Edinburgh) - Strategists at Scotiabank assessed the recent inflation figures in the Mexican macro scenario for the next months.
Key Quotes
“Mexican bi‐weekly CPI came in “slightly better than expected”, printing at 2.97% y/y vs consensus 3.0%. However, there were some elements that are worth monitoring, as they could be indications of pass‐through from the December FX weakness that could be starting to make its way into prices”.
“In particular, the 0.59% m/m increase in non‐food merchandise core inflation can be an indication of price contamination, although it was still only a +2.26% y/y rise”.
“Our sense is that while there are some risks to inflation, there are also factors that we see serving as important offsets: 1) Banxico is moving towards tightening rates, 2) we expect MXN to rebound on the aftermath of the Fed pulling the trigger on the first rate hike, particularly because we expect markets to focus on the tightening being very gradual after the trigger is pulled on the first hike”.
“We expect Banxico to tighten +25bps in July (afyer the Fed), followed by +25bps hikes in October and January 2016”.
Key Quotes
“Mexican bi‐weekly CPI came in “slightly better than expected”, printing at 2.97% y/y vs consensus 3.0%. However, there were some elements that are worth monitoring, as they could be indications of pass‐through from the December FX weakness that could be starting to make its way into prices”.
“In particular, the 0.59% m/m increase in non‐food merchandise core inflation can be an indication of price contamination, although it was still only a +2.26% y/y rise”.
“Our sense is that while there are some risks to inflation, there are also factors that we see serving as important offsets: 1) Banxico is moving towards tightening rates, 2) we expect MXN to rebound on the aftermath of the Fed pulling the trigger on the first rate hike, particularly because we expect markets to focus on the tightening being very gradual after the trigger is pulled on the first hike”.
“We expect Banxico to tighten +25bps in July (afyer the Fed), followed by +25bps hikes in October and January 2016”.