The second consecutive fall in Mexico’s mid-month inflation, to 7.8% y/y in December, confirms that inflation is now on a downward trajectory. This will allow Banxico to draw its tightening cycle to a close with a final 25 bp hike, to 10.75%, at its next meeting in February. But with inflation set to stay above target for a while yet, we think that rate cuts are unlikely before the second half of 2023.
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