The larger-than-expected fall in Mexican inflation last month, to 4.4% y/y, adds to the reasons to think that Banxico will row back on previous hawkish rhetoric when it meets this evening. We expect inflation to fall further, prompting a shift towards monetary loosening in Q3. We’ve pencilled in 75bp of cuts in the policy rate (to 7.50%) by year end, which is more easing than markets are pricing in.
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