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30 Mar 2015
Banxico keeps an eye on the Fed’s rate hike – Scotiabank
FXStreet (Edinburgh) - In the opinion of Eduardo Suarez, Senior Currency Strategist at Scotiabank, the Mexican central bank will remain vigilant on the Fed’s moves regarding the rates lift-off.
Key Quotes
“From Banxico's latest statement, our major takeaway is that the central bank's stance seems consistent with our view that in the absence of a Fed hike, Banxico does not seem to see the need to hike rates”.
“In particular, the board highlighted: the most recent data highlights the risk that the economy appears to be undergoing a cyclical slowdown (in sync with softer data we have seen out of the US), inflation is currently marginally below the central bank's target (2.97% vs. a target of 3.0%), and inflation expectations are firmly anchored”.
“On the external front, Banxico sees the recent slow data out of the US as transitory, but noted risks to US growth derived from the strengthening USD”.
“On the other hand, the board seemed to have turned somewhat more constructive on the balance of growth / inflation risks facing the EU”.
Our sense is that the central bank is preparing to hike after the Fed does (our DM economics team adjusted its call for the first hike until September), but we noted a slightly less hawkish tone in Banxico's statement that seemed to add some margin for not moving right after the Fed”.
Key Quotes
“From Banxico's latest statement, our major takeaway is that the central bank's stance seems consistent with our view that in the absence of a Fed hike, Banxico does not seem to see the need to hike rates”.
“In particular, the board highlighted: the most recent data highlights the risk that the economy appears to be undergoing a cyclical slowdown (in sync with softer data we have seen out of the US), inflation is currently marginally below the central bank's target (2.97% vs. a target of 3.0%), and inflation expectations are firmly anchored”.
“On the external front, Banxico sees the recent slow data out of the US as transitory, but noted risks to US growth derived from the strengthening USD”.
“On the other hand, the board seemed to have turned somewhat more constructive on the balance of growth / inflation risks facing the EU”.
Our sense is that the central bank is preparing to hike after the Fed does (our DM economics team adjusted its call for the first hike until September), but we noted a slightly less hawkish tone in Banxico's statement that seemed to add some margin for not moving right after the Fed”.