Bank of Mexico sees inflation shocks easing 

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Bank of Mexico’s governing board agreed that some of the shocks impacting inflation have shown signs of easing, though more interest rate hikes are possible as core inflation trends higher, minutes from the bank’s Nov. 10 monetary policy meeting showed Thursday.

Banxico, as the Mexican central bank is called, hiked its key interest rate by 75 basis points to a record 10.00% at its last policy meeting, in a split decision that left the door open to future hikes but cast doubt on how aggressively it would continue its monetary tightening cycle.

“All members agreed that some of the shocks that have affected inflation have shown signs of easing and pointed out the lower pressures on supply chains,” the minutes said.

Banxico’s five-member board also pointed out the impact that L.P. gas prices have had on declining non-core inflation.

Still, most members highlighted that short-term inflation expectations had increased.

“With respect to upward risks to inflation, most members highlighted the persistence of the core component at high levels,” the minutes said.

Official data released earlier Thursday showed core inflation, which is considered a better measurement for consumer prices because it strips out volatile food and energy prices, rose faster than expected in the first half of November.

The closely watched core index rose 0.34% in early November, statistics agency INEGI said, reaching 8.66% on an annual basis. Annual headline inflation in Mexico hit 8.14% in the period.

Banxico has now raised its target rate by 600 basis points since June 2021, as inflation has blown past its target rate of 3%, plus or minus one percentage point.

Minutes said at the bank’s next policy meetings, the board will assess the magnitude of upward adjustments to the reference rate based on prevailing conditions.

Board member Gerardo Esquivel, who voted for a smaller 50 basis points rate hike, issued a dissenting opinion, saying it was necessary to start reducing the pace of the hiking cycle.

Source: El Financiero

Mexico Daily Post