The Bank of Mexico (Banxico) raised the benchmark interest rate on Thursday by about 50 basis points, Leave it at 5.5% as of Dec 17, in the face of persistent inflation expectations, which have reached their highest levels in the past twenty years.
The Governor of Banxico voted in favor of the resolution, Alejandro Diaz de Leon Carrillo; Deputy Governor Galia Borja Gómez, Irene Espinosa Cantilano and Jonathan Heath. Gerardo Esquivel Hernandez only voted to increase the target overnight interbank rate by 25 basis points to the 5.25% level.
This is the first increase of 50 basis points by Banxico since February 9, 2017.
Similarly, Banxico’s board of directors raised its inflation forecast for 2021, againIt put it at 7.1% at the end of the year, three-tenths more than expected last November, while by the end of 2022 inflation will fall by 3.5%, which is already within the central bank’s target.
Inflation in Mexico saw a year-on-year growth of 7.37% at the end of November, the highest record for the month since 2001, according to data released this Thursday by the National Institute of Geography and Statistics (Inegi).
In its monetary policy decision statement, Mexico’s central bank acknowledged that global and domestic inflationary pressures continue to affect annual headline and core inflation, which in November registered 7.37% and 5.67%, respectively.
In the national financial markets, the exchange rate depreciated and medium and long-term interest rates showed upward adjustments, influenced by external conditions. Information from October shows a revitalization of economic activity after a contraction in the third quarter. The environment remains uncertain and loose conditions are expected, with marked differences between sectors.”
Yesterday, the US Federal Reserve announced an accelerated increase in monthly monetary stimulus and predicted up to three increases in interest rates, which are at historic lows, in 2022.
For its part, the Bank of England rose UK interest rates from an all-time low of 0.1% to 0.25%, the first increase in more than three yearsIn order to contain the high inflation which reached 5.1% in November.
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