“We still think there is a small chance of a 25 basis point hike. The reason is that headline inflation is still twice the official target rate. In addition, core inflation at the annual rate, which is considered a better indicator of price developments because it excludes some highly volatile items such as food and energy, remains quite high,” OctaFX’s research team says in a report. .
A survey carried out by the Reuters agency indicates that 12 of 15 analysts consulted expect Banxico’s key rate to remain at 11.25%. The remaining three anticipate a new increase of 25 basis points.
“We think that the statement will suggest that this cycle of increases is over. With this in mind, our attention will turn to information about how long it could last at the current level and when the cuts will begin,” Financiero Banorte said in a note from analysis.
“If Banxico wishes to confirm that inflation is on an invariable path of convergence to its objective, it is necessary to continue with monetary tightening. High inflation for a long time presents the risk of it taking root in the minds and decisions of economic agents, which could translate into a vicious circle of expectations of higher price increases. Thus, what we consider correct should be to raise the funding rate by 25 basis points at their meeting this week. The right thing is not necessarily what ends up being done”, details CI Banco for its part.
At the end of March, Banxico raised the reference interest rate by a quarter of a percentage point, moderating the pace of its monetary tightening cycle, adding that its next decision would be based on the inflationary outlook.
Banxico has increased the rate by 725 base points for almost two years to deal with inflation that reached maximum levels in more than 20 years.
The general consumer price index, which in August and September 2022 reached its highest in more than two decades at 8.70%, slowed last month to 6.25%, its lowest level since October 2021, although it is still far from the target official 3%.
With information from Reuters