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Banxico holds policy rate at 6.50% and drops prior guidance

BBH notes the central bank signaled it does not need to match expected Federal Reserve hikes.

Reported · Written up by our desk · Central Banks

Brown Brothers Harriman, via analyst Elias Haddad, said Banxico kept its policy rate at 6.50% for a third consecutive meeting and removed prior guidance that had been used to keep it fixed.

The analysis also said Banxico emphasized that it does not need to follow expected Federal Reserve rate increases.

Haddad added that the threshold for further tightening remains high if Mexican inflation stays in line with forecasts.

The note further said Mexico’s positive real yields and the external backdrop are supporting the peso, despite a less negative US-Mexico rate differential.

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