(C) Reuters. Mexican pesos are seen in this picture illustration August 3, 2017. REUTERS/Edgard Garrido/Illustration
By Anthony Esposito and Isabel Woodford
MEXICO CITY (Reuters) -The Bank of Mexico on Thursday increased its benchmark interest rate by a record 75 basis points to 7.75%, saying more rate hikes would be forthcoming if necessary as the central bank seeks to tame galloping inflation.
Inflation in the year through mid-June hit 7.88%, well above the central bank’s target of 3%, plus or minus one percentage point, data earlier in the day showed..
“For the next policy decisions, the board intends to continue raising the reference rate and will evaluate taking the same forceful measures if conditions so require,” the bank said in a post-meeting statement after its ninth hike in a row.
All five of the bank’s board members voted unanimously for Thursday’s rate increase, the largest hike under the Bank of Mexico’s current regime, which has been in place since 2008.
Banxico, as the bank is known, has been raising rates as it tries to moderate spiraling consumer prices, having increased the benchmark rate by 375 basis points since mid-2021.
Thursday’s move echoes the Federal Reserve’s hike last week by three-quarters of a percentage point, its largest increase in more than 25 years, and comes as policy makers in regional powerhouse Brazil raised rates to 13.25% and penciled in another hike for August.
Banxico underscored that in addition to inflationary shocks stemming from the COVID-19 pandemic, there are pressures linked to Russia’s war in Ukraine and strict lockdown measures imposed by China.
“The balance of risks for the trajectory of inflation within the forecast horizon is biased significantly to the upside,” said Banxico.
In view of greater-than-anticipated pressures on prices, Banxico revised up its forecasts for headline and core inflation. However, the bank still expects inflation to converge to its 3% target in the first quarter of 2024.
Mexico central bank makes record rate increase, flags more hikes