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Elevated housing inflation to keep Banxico hawkish

Housing inflation has become an increasingly important driver of core services inflation in Mexico – a key concern of the central bank, Banxico. And we think that robust household income growth and a lack of supply of dwellings will keep housing and, by extension, headline inflation higher than most expect in the next couple of years. This supports our view that Banxico’s easing cycle will be very gradual and that interest rates will stay high by past standards.

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