Mexico’s economy is set for half-point rate hikes


Mexico is expected to raise interest rates on Thursday, May 12th, as the country battles inflation running at the fastest pace in more than two decades.

Central banks in countries like Mexico and Peru will likely boost borrowing costs by half a percentage point, becoming the latest in Latin America to extend their monetary tightening campaigns after consumer prices rose more than expected in April.

Policymakers around the globe have been removing pandemic stimulus — and, in some cases, implementing restrictive monetary policies — after supply chain disruptions, rising commodity prices and Russia’s invasion of Ukraine fanned inflationary pressures.

The US Federal reserve quickened its tightening pace last week, increasing Fed funds by half a percentage point.

Mexico: Eighth Straight Hike

  • Current rate: 6.5%
  • Date of decision: May 12th, 2022.
  • Time of decision: 2 p.m. ET

Mexico’s central bank will raise its benchmark rate to 7% in its fourth consecutive increase of half a percentage point, according to 22 of 23 analysts surveyed by Bloomberg. One economist sees the bank hiking by 75 basis points to 7.25%.

Banxico, as the bank is known, has boosted rates seven times since June, from 4% to the current level of 6.5%. Yet annual inflation hit 7.68% in April, its fastest since January 2001 and more than double the 3% target.

The last hike in March was Banxico’s first unanimous decision during the current tightening cycle, which Governor Victoria Rodriguez Ceja said was intended as a robust signal to markets about the five-member board’s willingness to tame inflation. The move was somewhat overshadowed by President Andres Manuel Lopez Obrador announcing the decision hours before the bank. He later apologized, saying it was an unwitting mistake.

Source: El Financiero

Mexico Daily Post