Economy 32 minutes ago (Nov 10, 2022 02:48PM ET)
© Reuters. FILE PHOTO: The logo of Mexico’s Central Bank (Banco de Mexico) is seen at its building in downtown Mexico City, Mexico August 9, 2022. REUTERS/Henry Romero/File Photo
By Brendan O’Boyle and Anthony Esposito
MEXICO CITY (Reuters) -The Bank of Mexico hiked its key interest rate by 75 basis points to a record 10.00% on Thursday, in line with forecasts and following in the footsteps of the U.S. Federal Reserve’s recent three-quarters of a percentage point increase.
In a departure from recent decisions, the bank’s five board members did not vote unanimously for the increase, with Deputy Governor Gerardo Esquivel voting to hike the key rate by 50 basis points.
Esquivel told Reuters last month he saw the bank’s current rate-hiking cycle ending with rates between 10% and 10.25%, while a central bank survey of analysts last month predicted Mexico would end 2022 with a rate of 10.50%.
Banxico, as Mexico’s central bank is called, said at its “next meetings, the board will assess the magnitude of the upward adjustments to the reference rate based on the prevailing conditions.”
The latest hike came just hours after President Andres Manuel Lopez Obrador warned in a news conference that raising rates could slow down the economy.
“I very much question the fact that everywhere the formula to lower inflation is to increase (interest) rates, but this is inconvenient for the economy because credit becomes more expensive,” the president said.
The bank has raised its target rate by 600 basis points since June 2021, as inflation has blown past Banxico’s target rate of 3%, plus or minus one percentage point.
Inflation in Mexico slowed in October, official data on Wednesday showed, reaching an annual headline rate of 8.41%, down from the 8.7% annual rate the prior month.
In relation to inflation, Banxico said that “although some shocks show signs of subsiding, the balance of risks that might have an incidence on the trajectory of inflation within the forecast horizon remains biased to the upside.”
Banxico reiterated that inflation is projected to converge to its 3% target in the third quarter of 2024, and added that forecasts for average annual inflation for the fourth quarter now stand at 8.3%, down from a prior view of 8.6%.