Officials at the Banco de Mexico, the Mexican central bank hiked interest rates on Thursday by 25 basis points as widely expected by economists. This pushed the interest rates to 7% in Mexico.
Policy makers said that the borrowing costs are now high enough to contain any further rise in inflation. This was seen by the markets as a signal that the central bank is probably done with the interest rate hikes for the near term.
Mexico Interest Rate: 7.0%
The majority of policymakers voted on the rate hike in order to anchor the inflation expectations. They also considered the Fed’s policy tightening cycle.
Central bank officials noted that there were downside risks to growth but acknowledged an overall improvement. Inflation risks were said to be neutral based on the current monetary policy.
Yesterday’s rate hike marks a seventh consecutive rate hike from the Mexican central bank. Interest rates in Mexico stand at the highest levels since early 2009.
Consumer prices at 8-year high
According to the most recent records, consumer prices in Mexico rose to 6.1% in May, accelerating from 5.82% previously. For June, early estimates showed that consumer prices rose 6.3% in the first half of this month, suggesting that inflation was not slowing.
This was the highest inflation rate recorded since April 2009 as inflation accelerated for eleven consecutive months.
In the accompanying statement, Banco de Mexico said, “the reference rate has reached a level that is consistent with the process of efficient convergence of inflation to the 3 percent target.”
Read more: https://www.orbex.com/blog/2017/06/mexico-central-bank-hikes-rates-hints-end-policy-tightening/