Banxico will hike in 2022 to 7.00%

Genevieve Signoret

(Hay una versión en español de este artículo aquí.)

We revise up our central-scenario forecast for year-end Banxico monetary policy rates in 2022 to 7.00% from our previous 6.50%.

We expect the Bank to hike rates by 50 basis points on March 25, then again by 25 basis points at each of the monetary policy committee’s two meetings scheduled for quarter two, to end their tightening cycle in June 2022 at 7.00%.

We base our upward revision on two facts. First, while it is true that, in the past two months, headline inflation in Mexico has trended down on a month-on-month basis (to 0.7% from 0.9%), core inflation has done the opposite (crept up to 0.6% from 0.4%).

Second, with Russia’s having invaded Ukraine, we think that Banxico authorities will be revising up their outlooks for global commodity prices and thus their perceptions of Mexico inflation risk.

Headline inflation has trended down in month-on-month terms, but core inflation has not