Central Banks

Move is as expected

  • The decision was unanimous
  • raise the rates because certain risks to inflation have started to materialize which could affect convergence to inflation goal
  • balance of risk to inflation has deteriorated though with upward bias in an environment of high uncertainty
  • will be vigilant on relative monetary policy stance with US and output gap
  • balance of risks to growth maintains downside bias
  • peso could appreciate if NAFTA negotiations turn out to be favorable
  • convergence to 3% target will be slower than previously anticipated
  • further depreciation in exchange rates and pressures on fuel and gas prices would affect downward inflation trend
  • impact of US and Mexican tit-for-tat Inflation will be limited and of short duration
  • board will act quickly and firmly to factors that imply a risk to prices and inflation expectations
  • CPI risks include US dollar, NAFTA, election
  • downside CPI risks include favorable NAFTA talks
  • unit labor costs could exert pressure on CPI
  • risks of upward energy price, agricultural pressures
  • economy is still expected to face complex environment
  • economy better position to cope with bad scenario
  • sustainable public finance consolidation needed
  • balance of risks to growth keeps downside bias

The USDMXN has moved to a new session low (but just barely so far). The 20.2161-20.2446 area is the next target. The 200 bar MA (green line) comes in at 20.000 area. 

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