Banxico Preview: Policy rate at 3.5% and USD/MXN at 24 by year-end – Rabobank

Economists at Rabobank expect Banxico to cut the policy rate 50bp to 4.50% on 13 August. They expect USD to find support in the coming months, which should boost USD/MXN but expect the peso to outperform the rest of the region into year-end. 

Key quotes

“We expect Banxico to cut the policy rate 50bp to 4.50%. Of the 23 analysts surveyed by Bloomberg, 21 are expecting a 50bp move (including ourselves) and two are calling for a 25bp cut.”

“We expect at least 100bp of additional rate cuts in Mexico this year with significant risk of 150bp and this leaves us as an outlier on the dovish side. Despite this, and a weak US and domestic activity outlook, we expect MXN to outperform most of its LatAm peer but we expect depreciation against USD driving the USD/MXN pair up to 24 before the end of the year.”