The governing board of Bank of Mexico (Banxico) followed the line of the Federal Reserve (Fed) of the United States and increased its interest rate by 75 base points, to leave it at a level of 7.75% in its last meeting of monetary politics.
This is the first time, since the central institution adopted the inflation target of 3% +/-1 percentage point, which is an increase of that magnitude, and with this decision there are nine consecutive increases in Banxico’s interest rate.
The data does not surprise the market; however, after the inflation data for the first fortnight of June was released hours before the announcement of the decision of the Governing Board, some analysts suggested that a greater increase of 100 basis points was necessary.
The decision, according to the statement, was made unanimously considering the magnitude and diversity of shocks that have affected inflation.
“The Government Board evaluated the magnitude and diversity of the shocks that have affected inflation and its determinants, as well as the risk of contaminating medium- and long-term expectations and price formation.
He also considered the greatest challenges for the conduct of monetary policy in the face of the tightening of global financial conditions, the environment of heightened uncertainty, the inflationary pressures associated with the geopolitical conflict and the resurgence of Covid-19 cases in China, and the possibility of greater effects on inflation,” said the bank’s statement.
According to data from the National Institute of Statistics and Geography (Inegi), in the first half of June consumer inflation accelerated to 7.88%, from the figure of 7.72% in the second half of May.
Inflation has caused central banks around the world to tighten their monetary policy, this in the midst of a second year of economic recovery where the Covid-19 pandemic It is not over.