Banxico Likely At The End Of Its Easing Cycle After September Cut

• Fitch Solutions expects that Banco de México (Banxico) will hold its benchmark interest rate at 4.25% through end-2021, after cutting the rate at its most recent policy meeting.
• The agency expects inflation will hover near the upper end of Banxico’s 2.0-4.0% y-o-y tolerance band. This will discourage the bank from cutting further, despite the country’s deep contraction.
• While the agency sees a plausible scenario in which the bank cuts to 4.00% in the near term, over the longer term, risks from financial markets and public finances could lead the bank to hike rates before expected.

(Source: Fitch Solutions