Mexico’s August retail trade surprises on upside, Banxico may hike rates again in December

Mexico published its August retail trade data yesterday. It came as a surprise on the upside. It rose 0.6 percent on a sequential basis in August. According to analysts, retail trade was expected to stagnate. This signifies that consumption continues to be a significant driver of the Mexican economy. But the Banxico’s rate hikes by a total of 175 basis points since the end of 2015 are expected to increasingly take their toll, according to Commerzbank. Thus there seems a limited scope for further hikes by the central bank.

The Bank of Mexico is expected to hike rates once more in December in line with the U.S. Fed. Banxico might hike rates by further 25 basis points, stated Commerzbank. Following the likely hike in December, the central bank is expected to take a long break. But if the Mexican economy recovers more rapidly, then the central bank is expected to tighten its policy more markedly due to concerns regarding inflation.

The country is due to publish the economic activity index for August today which would provide a further indication of the economy’s state. If the economic activity data also surprises on the upside, the Mexican peso’s recovery is expected to continue today, noted Commerzbank.