The recent hikes in the country’s benchmark interest rate underscore the “commitment” of the Bank of Mexico (Banxico) to control pressure on prices as soon as possible, as inflation reaches its highest level in two decades, it said on Tuesday the outgoing governor of the institution, Alejandro Díaz de León.
Banxico redoubled its efforts to curb the rise in inflation and raised its benchmark interest rate by 50 basis points to 5.50% last week, beating market expectations and pushing the peso up against the dollar.
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It was the fifth consecutive time that Banxico raised the key rate in a divided decision within the Bank’s Governing Board.
“The Governing Board evaluated the magnitude and diversity of the shocks that have affected inflation and the factors that determine it, the risk that price formation will be contaminated and the challenges due to the tightening of global monetary and financial conditions” , indicated the monetary authority last week.
High inflation is becoming a global phenomenon as a consequence of supply and demand imbalances, as well as merchandise supply flows, caused by the Covid-19 pandemic.
According to a Reuters poll among specialists, they predict that inflation in the country continued to accelerate in the first half of December, reinforcing expectations that Banxico will continue to raise its benchmark interest rate next year.
The median of the projections of 11 specialists showed a rate of 7.73% for biweekly inflation, compared to that of the second half of November, of 7.70%. If the projection materializes, it would be the highest record since the second half of January 2001, when it was 7.86%.
Starting in January, after the departure of Díaz de León, Victoria Rodríguez Ceja, who was Undersecretary of Expenditures in the Treasury, will take the reins of Banxico after being appointed by President Andrés Manuel López Obrador for this purpose.
With information from Reuters
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