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Banco de México expects to continue raising interest rates

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The Board of Governors of the Bank of Mexico (Banxico) warned that it will continue raising interest rates in its next monetary policy decisions based on the performance of the Mexican and global economy, recognizing the risk of sustained inflationary pressures.

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Banxico “will assess the magnitude of the upward adjustments in the reference rate of its next meetings in accordance with the prevailing circumstances,” the minutes of the last meeting of the Mexican central bank revealed on Thursday.

The minutes correspond to the meeting of last August 11, in which Banxico raised the interest rate 75 base points for the second consecutive time and up to 8.5%, a level not seen before in the country.

The members of the central bank anticipated that they will closely monitor inflationary pressures, as well as all the factors that affect the expected trajectory for inflation and its expectations.

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All this, with the aim of determining “a reference rate consistent at all times (…) both with the orderly and sustained convergence of general inflation in the period in which the monetary policy operates and with an adequate adjustment of the economy and financial markets”, added the minutes.

In addition, Banxico also pointed out that the risks that could impact inflation continue with “a considerable upward bias”, so the expectations for this indicator for 2022 increased again and those for the medium term increased, although to a lesser extent.

“Everyone mentioned that the expectations of general and underlying inflation for 2022 increased again,” the minutes of the last meeting of the Mexican central bank revealed this Thursday.

Inflation in Mexico reached a level of 8.62 in the first half of August, the highest since 2000, according to data from the National Institute of Statistics and Geography (Inegi), while it closed the second quarter with a rate of 8.15%.

This is higher than Banxico’s outlook, which placed inflation at 7.8% for the second quarter of the year and which forecasts inflation of 8.1% in the last quarter of 2022, after an upward revision from 7.5%.

“The majority indicated that, in the face of higher-than-anticipated inflationary pressures, the forecasts for headline and core inflation were revised upwards until the third quarter of 2023,” the minutes indicated.

All members of Banxico’s Governing Board noted that non-core inflation remains at high levels, mainly affected by the category of agricultural goods

In addition, they pointed out that the forecast is maintained that convergence to the 3% inflation target will not be reached in the first quarter of 2024.

Source: Gestion

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