The further rise in Mexico’s core inflation rate to a 12-year high of 5.1% y/y in the first two weeks of October, which contributed to the rise in the headline rate to 6.1% y/y, will add to the growing hawkish sentiment at the central bank. However, given the weakness of the economy, we think the tightening cycle will remain gradual with another 25bp rate hike, to 5.00%, at the next meeting in mid-November.
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