Bank of Mexico raises interest rates to record 8.5%, tunes tone on future path According to Reuters

© Reuters. FILE PHOTO: The logo of the Central Bank of Mexico (Banco de Mexico) is seen at its building in downtown Mexico City, Mexico August 9, 2022. REUTERS/Henry Romero

By Anthony Esposito and Isabel Woodford

MEXICO CITY (Reuters) – The Bank of Mexico raised its benchmark interest rate by 3/4 percentage point to a record 8.5% on Thursday, reflecting the most recent policy decision by the US Federal Reserve. as inflation rose to its highest level in more than two decades. .

Five members of Banxico’s board of directors, as central banks, voted unanimously for a second consecutive 75 basis point hike, saying the board will “assess the extent of the adjustment increase in the reference rate for its further policy decisions based on prevailing conditions.”

Analysts say that its forward guidance language tends to be somewhat dovish, correcting the tone of the previous monetary policy statement on June 23 when it said the board expected intends to continue raising interest rates and will “assess the implementation of similarly aggressive measures if conditions require.”

This comes after a slowdown in US inflation may have opened the door for the Federal Reserve to rein in future growth, although US policymakers have stressed they will continue to tighten their grip. tighten monetary policy until price pressure is completely contained.

“We still think Banxico will follow the Fed in the hiking cycle to maintain the historic 600bp interest rate differential,” said analysts at Actinver Research.

Banxico raised interest rates by a total of 450 basis points in its last 10 monetary policy meetings.

Annual inflation in Latin America’s second-largest economy rose to 8.15% in the year to July, the highest level in nearly 22 years.

Banxico said on Thursday that the balance of risks to the trajectory of inflation “remains markedly upturn.”

The rate hike, in line with expectations in a Reuters poll, brought the key rate to its highest level since the current Banxico regime was introduced in 2008.

Its latest policy move comes with several other countries in the region.

Earlier, Argentina’s central bank raised its key interest rate by 950 points, just two weeks after its last hike, amid soaring inflation, which is forecast to reach 90% by the end of the year.

Peru’s central bank is expected to raise interest rates on Thursday by 50 basis points, after annual inflation eased slightly but remained at multi-year highs.

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