Anna 
During the Asian trading session on Tuesday, the USD/MXN pair appears to be extending its decline for the third consecutive day, hovering around 17.6000. The currency pair is under downward pressure ahead of the release of U.S. Consumer Price Index (CPI) data, with expectations of a rise in inflation for October, albeit at a slowing pace. Forecasts for the annual core inflation rate, however, remain stable.
The anticipated inflation data could prompt the Federal Reserve (Fed) to consider a 25 basis points interest rate hike in subsequent meetings if the upcoming data exceeds expectations. The Fed’s emphasis on data dependency suggests that robust inflation figures could play a crucial role in influencing decisions on further policy tightening.
Victoria Rodriguez Ceja, Governor of the Bank of Mexico (Banxico), emphasized that due to the slowdown in inflation prospects, the likelihood of discussing a rate cut is minimal. She highlighted that any easing of monetary policy would be gradual and not necessarily imply a sustained decrease in rates. Ceja noted that the board would consider macroeconomic conditions, adopting a data-dependent approach in their decision-making.
The Bank of Mexico decided to maintain the interest rate at 11.25%, aligning with the 4.26% year-on-year inflation rate in October. This figure, slightly lower than the predicted 4.28% and notably below the previous 4.45%, likely influenced the central bank’s decision. Additionally, the Bank of Mexico committed to achieving a 3.0% inflation target by 2025, indicating a commitment to maintaining the policy rate at the current level for an extended period.
