Banxico likely to deliver a pre-emptive hike on MXN weakness

Mexico's positive inflation outlook, along with risks to growth, indicates that Banxico will lag the US Federal Reserve during its rate-hiking cycle next year. 

"We expect two more hikes of 25bp, at the March and June meetings. As widely expected and against our expectation, the board of Banxico decided to set the reference rate at 3.25%", says Barclays in a research note. 

Banxico's monetary policy board mentioned that "although the central scenario of inflation in the short and medium term is in line with the consolidation of inflation to target". 

The central bank decided to rise the rate in response to Fed hike to avoid additional MXN exchange rate depreciation and affect inflation and inflation expectations.