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Mexico Central Bank Raises Benchmark Interest Rates

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Mexico Central Bank Raises Benchmark Interest Rates

Mexico benchmark interest rates
Mexico benchmark interest rates
The Mexico Central Bank is expected to publish benchmark interest rate hikes to 8.5% today. Photo: REUTERS/Daniel Becerril

The Central Bank of Mexico – Banxico – release interest rates decision today amid rising inflation concerns.

This comes as inflation reached 8.16% last month compared to a year earlier, while annual core inflation is forecasted to reach 7.6%, the highest since 2000. Moreover, Banxico has increased the interest rate over the last nine monetary policy meetings to maintain inflation within 3%.

Analysts predict Banxico will likely deliver a second straight 75 basis point increase to the interest rate, bringing Mexico’s interest rate to 8.5%. Some expect the interest rate to hit 9.5% by the end of 2022.  However, the Mexican economy expanded 1% in three months to June, similar to the previous period, while exceeding market expectations.

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Meanwhile, the government increased the country’s minimum wage by 22% in 2022 to almost $8.50 a day to assist citizens. However, inflation now consumes much of that increase. While the Mexican economy will grow gradually, it is likely to only reach its pre-pandemic growth rates in 2023. Despite interest rates continuing to increase in the medium-term, government strategies to stimulate grain production, write off import tariffs and work closer with businesses to cap product prices will likely lead to long-term inflation decreases.

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