Mexico’s central bank on Thursday raised its benchmark interest rate to 10 per cent as core inflation remained stubbornly high.
Banco of México increased the reference rate by 0.75 percentage points, marking the 12th consecutive meeting it has tightened monetary policy.
Analysts widely anticipated an increase of 0.75 percentage points, but the decision by the five-member board was not unanimous. Governor Gerardo Esquivel Hernández voted for an increase of 50 percentage points.
“The statement feels less restrictive . . . . They’re speaking of lower cost pressures and the appreciation of the peso,” said Gabriela Siller, head of financial and economic research at Banco Base. “It seems like they’re preparing the market for increases of less than 75 basis points.”
Banxico’s decision replicates the four consecutive 0.75 percentage point increases by the Federal Reserve in the US.
Santiago Fernández of Banco Intercam expected a year-end reference rate of between 10.50 per cent and 10.75 per cent, but said in a research note, “A decoupling from the Fed is not expected, at least for the remainder of 2022.”
Banco de México slightly revised its inflation targets, saying in a statement, “For the short term, the forecasts for general inflation show marginal downward revisions, while those corresponding to core inflation were revised slightly upwards.” It anticipated reaching its 3 per cent inflation target in the third quarter of 2024.
The rate inflation followed news that inflation decelerated to 8.41 per cent in the 12 months ending in October from the 8.70 per cent registered in September, according to state statistics service Inegi. Core inflation, however, continued accelerating to 8.42 per cent.
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