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Mexico no longer has the highest interest rates in the world. But, that doesn’t mean their central bank isn’t still looking to ease further.
Inflation hasn’t picked up significantly since the Banxico embarked on its latest easing cycle. However, neither has the economy.
There were reasons to suggest that Mexico would be a beneficiary of the US-China trade tensions. And the USMCA finally removed that bit of uncertainty. However, that hasn’t shown in the data.
The consensus among polled economists shows a strong inclination towards a fifth consecutive rate cut. That puts the rate at 7.25%.
This would imply that the interest rate spread with the US closed by 50 basis points, cutting the interest premium for Mexican assets to a similar level to mid-2017. In that period, the USDMXN drifted from the 17.70 handle to a little over 18.70.
In the lead-up to the decision, the Banxico has issu...
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