Banxico will close a restricted cycle with a target rate of 10.75%: Barclays

Banxico will close a restricted cycle with a target rate of 10.75%: Barclays

Economists at Barclays have estimated that the bullish cycle for the price will end until next year, when it reaches 10.75% and will remain unchanged throughout 2023.

They argued that a more aggressive Fed against inflation would lead to a much longer cycle of rate hikes in emerging Latin America, and Mexico would have to reverse the size of US increases to maintain an attractive rate differential.

Investment bank experts are of the opinion that Mexico will keep the spread at 600 basis points in relation to the FOMC target of the Federal Reserve.

This means that they expect to increase four more consecutive times for September, November, December and still February next year, two of which will exceed 75 points and the other two by half a point each.

According to the latest forecast, the Bank of Mexico is likely to raise 75 basis points at this Thursday meeting (which will raise the rate to 9.25%) and that it will rise by another three-quarters of a point in November (to leave the yield 10 points).

They consider that for December, in the last monetary announcement of the year, Banxico will ease the volume of increases to 50 basis points, which will leave the rate at the end of the year at 10.50%.

Within the analysis entitled Are we close to ending the upward cycles in Latin America? They explained that maintaining stable financial conditions will be reflected in the exchange rate.

Mexico has to offer a higher return in the face of increased risks to the country to maintain its attractiveness to foreign investors.

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This margin should be attractive enough when it has to compete with that which gives it a secure and stable economy like the United States.

That is, it cannot be assumed that investors will accept a premium of less than 600 points when weaknesses to enhance investor attractiveness continue to widen.

In the analysis, they explained that the actions of central banks in Latin America will depend on domestic factors such as inflation and growth dynamics.

They argue that inflation itself gives Banxico reasons to keep the accelerator tight on monetary policy, but they make it clear that higher rates have no such direct effect on moderate inflation through demand.

This is because the country has low banking penetration which does not facilitate direct impact on credit.

fight inflation

the meeting

On Thursday, September 29, the Bank of Mexico will make its sixth monetary announcement of the year.


Barclays experts predict that it will achieve a third consecutive increase of 75 basis points, the third increase out of four that it will have this size.

to the thread

With Thursday’s increase, they will add 11 consecutive increases to the Bank of Mexico reference rate.

A high degree

Rates are likely to remain high in Latin America for a long time to come, regardless of whether central banks end their bullish cycles.

little effect

Raising the interest rate has little effect on inflation, because the country has a low level of banking services that do not provide a direct effect on credit.

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