Banxico interest rate decision on 21.06.2018

  • prior 7.50%
  • Decision unanimous
  • Balance of risks to growth retains a downside bias
  • Certain risks to higher inflation have started to materialise which could take inflation to the goal
  • Vigilant on relative monetary policy stance with US and output gap
  • Peso could appreciate if Nafta negotiations turn out favourable
  • Risk in convergence to reach 3% target on inflation will be slower than anticipated
  • Impact of US and Mexican tit-for-tat tariffs on inflation will be limited and of short duration
  • Further depreciation in exchange rate and pressures on fuel and gas prices would affect downward inflation trend
  • Board will quickly and firmly act to factors that imply a risk to prices and inflation expectations

USDMXN going into the decision around 20.31. Comes out a tad weaker towards 10.28.
Everything more or less as expected, neutral but cautious. Not letting vigilance go into the elections and Nafta negotiations.

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