The Bank of Mexico (Banxico) raised the interest rate to 10.5 percent, the highest level in its history, which represents the thirteenth consecutive increase in the face of the highest inflation levels in two decades.
“The Governing Board evaluated the magnitude and diversity of the shocks that have affected inflation and its determinants, as well as the evolution of medium- and long-term expectations, and the price formation process,” the central bank said in a statement. the announcement.
The 50-point increase, which broke the trend of four previous consecutive increases of 75 points, was approved by a majority of four votes, while Deputy Governor Gerardo Esquivel asked to increase the rate by just 25 points.
The increase was within expectations after it was revealed last week that the inflation declined at an annual rate of 7.8 percent in novembera drop compared to 8.41 percent in October and 8.7 percent in August and September, then the highest since 2000, according to the National Institute of Statistics and Geography (Inegi).
With the increase, the autonomous body argued that it seeks the “objective of determining a consistent reference rate at all times, both with the orderly and sustained convergence of general inflation to the goal of 3 percent in the term in which the monetary policy, as with an adequate adjustment of the economy”.
In its justification, Banxico warned that “although some shocks have shown signs of mitigation, the balance of risks in the path expected for inflation in the forecast horizon continues to be upwards.”
For this reason, the central bank stated that “forecasts for headline inflation were adjusted downward for the first two quarters and were later revised marginally upwards until the fourth quarter of 2023.”
Banxico now expects headline inflation to average 8.1 percent annually in the last quarter of 2022 after the previous expectation of 8.3 percent.
The inflation rate would not be at the 3 percent target until the fourth quarter of 2024, according to the central bank.
As upward risks, the Governing Board listed the persistence of core inflation at high levels, external inflationary pressures derived from the pandemic, pressures on agricultural and energy prices due to the war in Ukraine, and exchange rate depreciation.
“The Governing Board considers that it will still be necessary to increase the reference rate at the next meeting. Going forward, he will assess the need for additional adjustments in the reference rate and their magnitude, ”he warned.
This is the last announcement of the year by the Bank of Mexico, which will review the rate again on February 9, amid the expectation of knowing the successor to Deputy Governor Esquivel that the president, Andrés Manuel López Obrador, will nominate within the next few weeks. .
With information from EFE