🏦🇲🇽Cable FX Macro Weekly Note: Banxico November Rate Decision

**As seen in Risk In The Week report 11/03/23, subscribe at cablefxm.co.uk/reports

Banco de Mexico kept its policy benchmark rate unchanged at 11.25% in September, the overnight rate has been on hold since May. The central bank said that inflation expectations have increased since they last met, and they noted that shocks continue to affect services prices. Banxico does not see CPI converging into the target until 2Q 2025 as they raised their headline and core price forecasts through the horizon. The board now pencils CPI rising by 4.7% in 2023 before slowing down to 3.4% in 2024. We're set to receive the latest consumer prices report before Banxico, expectations see an extension of the deflationary trend. However, market focus is likely to lie on the services component, as it recorded an uptick in September to 5.23% Y/y. The desk at Goldman Sachs recently pushed forward their Banxico rate cut call to March from December, they see a total of 150bps of rate cuts leaving the overnight rate at 9.75%. Economists at Natixis argued that the stickiness seen in the core CPI will likely delay Banxico's easing cycle, they have now pushed their rate cut call to May from March. Natixis noted the Mexican economy is supported by resilient growth in the U.S. and they revised their Mexico 2023 GDP growth forecast to 3.6% from the prior 2.8%. Lastly, Natixis said that Banxico's November decision will note output strength and sticky inflation, while they added that the meeting is unlikely to be market moving.