Central Banks in Mexico and Colombia Lift Interest Rates by 25 Basis points

September 30, 2021

The Bank of Mexico’s overnight interest rate, which had been cut by 25 basis points in February to culminate a cumulative reduction of 325 basis points over a one-year period, has been subsequently raised by 25 basis points three subsequent times to 4.75% to counter rising inflation and ensure that inflation will settle back to 3.0% within the policy horizon. CPI inflation crested at 6.1% in April but remains elevated at 5.6%. A released statement from the Bank of Mexico’s Governing Board warns that “although the shocks that have increased inflation are expected to be transitory, due to their variety, magnitude, and the extended horizon over which they have affected it, they may pose risks to the price formation process and to inflation expectations.”

The Central Bank of Colombia’s policy interest rate was raised today to 2.0% from 1.75%. This was the first increase since 2016 and likewise is a response to rising inflation that has been steeper and longer-lasting that assumed initially. Today’s move was made one year after the final in a series of cuts engineered during 2020 that slashed the rate from from 4.25% to 1.75%.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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