Warsh Leaves a New Fed Rate Hike in Doubt as the Peso Advances
Kevin Warsh did not signal a rate hike at the Fed's October 27 meeting, and the Mexican peso appreciated to 18.39 per dollar. Here are the key figures.
Federal Reserve Chair Kevin Warsh did not signal on Friday, October 16 whether the central bank will raise rates at its October 27 and 28 meeting, and the probability of a hike fell below 15% from 27%, according to El Financiero. The Mexican peso appreciated 0.10% that day, to 18.3958 units per dollar.
The Fed raised rates 25 basis points in September, its first increase since 2023, with the backing of all 19 monetary policy officials. Warsh spoke in Bangkok during the annual meetings of the International Monetary Fund, and Goldman Sachs economists led by Jan Hatzius concluded that the Federal Open Market Committee is headed for a pause. For a Mexican SME that imports inputs or exports, the sensitive point is the rate differential between Mexico and the United States. According to El CEO, Grupo Financiero Monex attributes the peso's appreciation to an environment of lower risk aversion following Donald Trump's comments on Iran and to the drop in oil prices.
At bank teller windows, the dollar sold for 18.89 pesos at Banamex, 18.80 at Banorte, 18.69 at BBVA and 18.40 at currency exchange houses, with an overnight range of 18.34 to 18.46 units. The dollar index retreated 0.27%, to 101.78 points, and the peso is on track to break a streak of five consecutive weeks of losses against the greenback. The session brings no local indicators that would move the exchange rate, and traders' attention is on the CFTC's Commitments of Traders report on net speculative peso positions. Warsh also addressed artificial intelligence: "If you're a central banker and your job is to try to ensure stable prices and full employment, you have to recognize AI as a shock," he said.
The data leaves two dates on the table: the FOMC meeting on October 27 and 28 and the CFTC net positions report. If the Fed raises rates 25 basis points this month, the rate differential between Mexico and the United States falls to its historic low and the appeal of the carry trade diminishes, according to El CEO.
This article was written with the assistance of artificial intelligence based on verified sources and reviewed by a human editor before publication.