Bank of Mexico Raises Key Interest Rate by 75 Basis Points

August 12, 2022

Officials at the Bank of Mexico by a unanimous vote agreed to lift their overnight interbank lending rate by 75 basis points to 8.5%, which matches the highest rate level since November 2005. From February 2020 through February 2021, the rate had been reduced 325 basis points in total to 4.0%, but rate increases that began in June 2021 now total 450 basis points. Mexican CPI inflation has accelerated from 5.8% in July 2021 to 8.15% last month, and a statement explaining today’s decision revises the projected future likely path of inflation higher for every quarter through 3Q 2023. Officials moreover conceded that while there are both upside and downside risks to their forecast, the balance of inflationary risks is skewed to the upside. Headline and core CPI next quarter are projected at 8.1% and 7.6%, respectively, but the updated forecast has both aligned with the 3% objective at 3.1% and 3.0% by 2Q 2024.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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