The further rise in Mexico’s headline inflation rate to 8.7% y/y in August will strengthen the case for Banxico to deliver a third consecutive 75bp increase to interest rates later this month. But with Mexico’s economy struggling and the Fed likely to slow the pace of tightening, we think that Banxico will opt for a 50bp increase, to 9.00%. The bigger picture is that Mexico’s tightening cycle is drawing to a close.
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