Bank of Mexico hikes rate again as inflation spirals

- Advertisement -

MEXICO CITY (Businesshala) – The Bank of Mexico on Thursday raised its benchmark interest rate by 25 basis points for the fourth straight policy meeting, taking it to 5.00% in a 4-to-1 vote by its governing board, as markets Saw it. Onward for more hike down the pike.

FILE PHOTO: The logo of the Central Bank of Mexico (Banco de Mexico) is seen in its building on February 28, 2019 in Mexico City, Mexico City. Image was taken on February 28, 2019. REUTERS/Daniel Becerril

The decision was in line with a Businesshala poll of analysts and annual inflation accelerated to 6.24% in the year through October, more than double the central bank’s target of 3%, plus or minus one percentage point.

- Advertisement -

“The shocks that lead to inflation are largely considered transitory. Nevertheless, the horizon in which they may affect this is unknown, and they have covered a wide range of products, while of considerable magnitude,” the central bank said in its policy statement.

This poses greater risk to the value creation process and inflation expectations, as the bank is known, Banxico said.

Capital Economics chief emerging market economist William Jackson said Banxico will likely continue to raise the benchmark rate in increments of 25 basis points, ending with the bank’s tight cycle at 6.00%.

“There is little evidence that the board of Banxico has the appetite to accelerate the pace of hardening, as have other central banks in Latin America,” Jackson said.

Brazil’s central bank is considering an even bigger interest rate hike before making a 150-basis-point hike in late October, minutes of its last policy meeting showed, prompting an aggressive response to double-digit inflation. Underlines.

On the development, Banxico noted that preliminary data showed the Mexican economy contracted during the third quarter, but that its recovery should resume in the fourth quarter.

“Uncertainty persists and sluggish conditions are forecast with significant differences across sectors,” the Mexican Central Bank said.

At upcoming monetary policy meetings, Banxico said its five-member board would closely assess the behavior of inflationary pressures and all factors affecting the “projected trajectory for inflation and its expectations”.

Banxico forecasts an average annual inflation rate of 6.8% for the fourth quarter, higher than the prior forecast of 6.2%, while the core index, which excludes some volatile commodities, averaged 5.5% over the same period. is seen, as against the prior view of 5.3%. ,

Reporting by Anthony Esposito and Dave Graham; Editing by Chizu Nomiyama


- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox