Ella 
USD/MXN appears to be extending its losses for the third day in a row, trading around 17.6000 during the Asian session on Tuesday. The pair is under downward pressure ahead of US CPI data as inflation is expected to rise in October, albeit at a slower pace. Meanwhile, forecasts for the annual rate of core inflation remain stable.
However, if the upcoming inflation data exceeds expectations, it may prompt the Federal Reserve (Fed) to consider raising interest rates by 25 basis points at a subsequent meeting. The data-reliance emphasized by Fed officials suggests that strong inflation data could play a key role in influencing the central bank’s decision to further tighten policy.
Mexico’s central bank (Banxico) President Victoria Rodriguez Ceja stressed that discussions on interest rate cuts were unlikely due to a slowing inflation outlook. She mentioned that any loosening of monetary policy would likely be gradual and would not necessarily mean sustained interest rate cuts. She noted that the board will consider macroeconomic conditions and take a data-reliant approach in decision-making.
The Bank of Mexico’s decision to keep interest rates at 11.25% is in line with Mexico’s inflation rate, which rose 4.26% year-on-year in October. The figure was slightly lower than the 4.28% forecast and significantly lower than the 4.45% seen last time, which may have played a role in the central bank’s decision. In addition, the Bank of Mexico has also committed to achieving an inflation target of 3.0% by 2025, indicating that the bank will maintain policy rates at current levels for some time.
