The rise in Mexico’s headline inflation to a 20-year high of 7.4% y/y in November will be a concern for Banxico. But it was partly driven by unfavourable base effects which will soon unwind. And given the recent weakness in activity, we still think the pace of policy tightening will remain gradual with a 25bp rate hike, to 5.25%, at the central bank’s meeting next week.
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