Quotes from Barclays Capital:
- Mexico CPI increased 0.11% 2w/2w in the first fortnight of February, driven by a strong core print (actual: 0.28% 2w/2w, consensus: 0.16%, Barclays: 0.18%), partially offset by higher-than-expected non-core deflation (-0.42%). Annual inflation remained stable at 3.04%, with the core component increasing to 2.4% (from 2.3% previously).
- Today's print raises concerns about future dynamics of inflation since the MXN will remain under stress. In fact, we expect the MXN to reach 15.50 in six months. The inflation of durables will likely continue to reflect these MXN pressures but should remain contained as long other CPI components offset them.
- Nevertheless, we expect a more hawkish Banxico stance that suggests that the board is ready to implement a pre-emptive hike ahead of the US Fed, if necessary. So far, as inflation is still on a safe path, we maintain our call that Banxico will remain on hold March 26.
