The Bank of Mexico is expected to hike its key interest rate on Thursday. With the peso depreciating sharply last week and the sustained pressure on the currency, the central bank is likely to raise rates by 25 basis points at its meeting on Thursday, said Societe Generale in a research report.

However, there is a high possibility of the Banxico to hike rates by 50 basis points. Moreover, depending on the movement of the Mexican peso, the central bank might also opt for an unscheduled rate hike after the June meeting.

Given the gradual rebound in commodity prices, the peso’s near-term outlook will be driven by the US political situation, wider EM risks and likely US Fed action. The Mexican peso is expected to perform poorly as compared with its peers as the market hedges the outcome of US elections, according to Societe Generale. The Bank of Mexico is likely to hike rates one more time in December.

However, the upside risk of further tightening in 2016 is countered by the likelihood that the US Fed considers the events unfolding in the aftermath of Brexit vote as a cause of worry. Furthermore, if these events result in weakening of confidence and investment, there might be calls for further easing by central banks globally, noted Societe Generale.

“Overall, the currency and US policy prospects will continue to play a larger role than the domestic economy in shaping Banxico’s policy outlook over the next few months,” added Societe Generale.