Mexico: strong wage growth to curb fall in inflation

Headline inflation in Mexico will continue to fall back over next couple of years, but strong wage growth means that it won’t return to Banxico’s 2-4% tolerance band until late-2024. Against that backdrop, we think the central bank will deliver two more 25bp interest rate hikes, to 11.50%, and will not turn to loosening until the very end of this year. Our interest rate forecasts lie well above the consensus and what is priced into financial markets.