On June 25, 2024, the Bank of Mexico (Banxico) decided to keep its policy rate unchanged at 6.50%, a move that was unanimously expected by both traders and analysts, as confirmed by all 26 participants in a Bloomberg survey [1]. Rabobank strategists Christian Lawrence and Molly Schwartz noted that the decision was in line with consensus and that Banxico explicitly stated its intention to maintain the current rate over the coming meetings [1].
Rabobank expects Banxico to remain on hold throughout the year, mirroring their outlook for the Bank of Canada (2.25%) and the Federal Reserve (upper bound of 3.75%) [1]. The strategists project that the USD/MXN exchange rate will remain largely rangebound over the summer, with a base case forecast of 17.6 by year-end [1]. They also downplay the likelihood of a United States-Mexico-Canada Agreement (USMCA)-related premium emerging, citing the move to annual reviews following the absence of a 16-year renewal as of July 1 [1].
Market reaction to Banxico's decision was described as virtually non-existent, with the USD/MXN exchange rate showing no significant movement following the announcement [1]. The overall tone from Rabobank suggests stability for the Mexican Peso in the near term, with little expectation of volatility stemming from monetary policy or trade agreement developments [1].
CONCLUSION
Banxico's decision to hold rates at 6.50% was fully anticipated and resulted in no notable market reaction. Rabobank expects the Mexican Peso to remain stable against the US Dollar through the summer, with minimal impact from USMCA developments. The outlook for the remainder of the year is one of continued policy stability and rangebound trading for USD/MXN.