Banxico rate decisions in key commodity producers

Banxico recently adjusted its monetary policy meeting calendar in order to make a decision right after the FOMC meetings. Accordingly, next week there will be Fed decision on July 29 and Banxico will meet on July 30. 

The board mentioned that the relative monetary position with the US has an important effect in the evolution of the USDMXN, inflation expectations and price dynamics in Mexico, motivating the adjustment. 

"A September hike is expected by the US Fed, Banxico should be hiking in that month too. Nevertheless, the board is still facing a dilemma since the economy is still far from booming and inflation will likely continue to stay below target, suggesting no need to move", says Barclays.

On the other hand, the recent MXN depreciation might put additional pressures on the CPI as the components that offset the recent price pressures in durable goods prices in H1 (lower energy and services prices) will not be present in H2. 

Hence the board may expect inflation to accelerate. So far, inflation continues to surprise the markets on the downside, curbing these fears, because the US Fed will likely remain on hold next week,

"Banxico should do as well but under a neutral tone, given the recent MXN performance and the potential risks. The domestic conditions are supportive for keeping inflation under control", added Barclays.