Mexico’s headline inflation rate was unchanged at 8.7% y/y in September and will probably start to drop back over the coming months. But it will remain above the upper end of Banxico’s 2-4% tolerance band for some time and, with the Fed still in a hawkish mood too, the tightening cycle has a bit further to run. We expect the policy rate to be raised from 9.25% now to 10.50% by early next year.
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