Mexico and other Latin American countries are set for new rate hikes


Mexico and Peru’s central banks are expected Thursday to hike their key interest rates to the highest point in more than a decade, as they continue their record tightening cycles to try to wrestle persistent inflation back under control.

Banxico, as the Mexican central bank is known, will raise its benchmark rate by 75 basis points to 8.5% — its highest since adopting a target rate in 2008 — according to all 23 economists surveyed by Bloomberg. Peru, in the meantime, will increase borrowing costs by a half-point to 6.5%, eight of nine analysts predict.

Both banks have been steadily boosting rates since mid-2021 as they, like their peers worldwide, struggle to contain a surge in consumer prices.

Separately, Argentina is also expected to boost its key rate Thursday even if no formal central bank announcement is set up.

Mexico’s central bank is widely expected to take its rate past its previous record of 8.25%, following the US Federal Reserve in delivering a second straight 75 basis-point hike.

When announcing its unanimous June decision, Banxico’s five-member board said in a statement it “intends to continue raising the reference rate and will evaluate taking the same forceful measures if conditions so require.”

The board meets just after new data showed inflation hit its highest point in over 21 years in last month, despite the central bank boosting its target rate 375 basis points in the past 14 months.

Core inflation, which excludes volatile items like fuel, accelerated above expectations to 7.65% in July from 7.49% the previous month. Meanwhile, wages rose faster than any time since 2001 at 9.5% and far quicker than headline inflation of 8.15%.

Source: El Economista

Mexico Daily Post