Bank of Mexico increases the interest rate by 75 points to curb inflation

First modification: 06/24/2022 – 04:46

In search of the formula. The increase is the ninth consecutive increase in the price of money by the Mexican central bank and the largest increase since 2008 to try to curb inflation, which stood at 7.88% in the first half of June, the highest since January 2001. .

The Bank of Mexico has raised benchmark rates by 375 basis points since June last year.

“Global inflation continued to rise, in some cases reaching its highest level in decades, pressured by the persistence of bottlenecks, the recovery of demand and the high prices of food and energy,” the Mexican issuer communicated in its announcement, who adopted the measure unanimously.

This same Thursday it was known that the general inflation rate in Mexico increased during the first half of June to reach 7.88%, the highest level since January 2001, according to data from the National Institute of Statistics and Geography, Inegi.

Goal of 3% per year

For this year, the Bank of Mexico’s goal is 3% per year, and inflationary pressure has forced them to promote a sustained rise in interest rates in order to contain this price rise.

Banxico announced that “the Governing Board intends to continue increasing the reference rate and will consider acting with the same forcefulness if required.”

Carlos Morales, director of ‘Fitch’ for Latin America, commented that the markets were already anticipating this increase of 75 base points in the price of money, especially after a similar increase made by the Federal Reserve, Fed, in the US this week .

According to him, the renewed upward pressures on inflation, with an increase in forecasts, given “the possibilities of further hikes by the Fed, a prolonged duration of the war in Ukraine and further disruptions in supply chains due to lockdowns due to the pandemic in China.

Morales added that they expect “the interest rate will reach 8.5% by the end of 2022,” but it is something that will be defined at the next meeting on August 11.

In early June, Banxico lowered its GDP growth forecast for 2022 to 2.2% from the previous forecast of 2.4%; and also lowered its central projection of GDP for 2023 to 2.4%, from a previous estimate of 2.9%.

While it increased its forecast for general inflation, leaving it at 7.5% annually in the last quarter of 2022, compared to the previous forecast of 6.4%.

Investors are attentive to interest rate hikes in the United States, where there is a lot of speculation about the risk of a recession, something that the president of the Fed, Jerome Powell, has put on the table and that would have a direct impact on the Mexican economy, taking into account the close economic ties between both nations.

with EFE