Bank of Mexico’s 50-Basis Point Rate Hike Exceeds Expectations of Half That Much
February 9, 2023
Mexico’s overnight interbank rate has undergone big swings since the onset of the Covid Pandemic at the start of 2020. The Bank of Mexico’s Board cut such from 7.25% to 4.0% between February 2020 and February 2021, then hiked the rate by 150 basis points over the balance of 2021 and by an additional 500 basis points in 2022 to 10.50%. At 11.0% after today’s announcement the rate is 700 basis points higher than two years ago and at a record high. Today’s decision was unanimous and accompanied by a hawkish statement that observes a “slower-than-foreseen disinflationary process, prompting an upwardly revised projected inflation path through the entire forecast time horizon. Headline and core CPI inflation in January of 7.9% and 8.45% were each higher than in December. Nonetheless, the Board’s statement leaves open the possibility that the next rate hike might be smaller than 50 basis points: “Given the monetary policy stance already attained and depending on the evolution of incoming data, for its next policy meeting, the upward adjustment to the reference rate could be of lower magnitude.”
Copyright 2023,Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Mexico
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