The Bank of Mexico raises its interest rate to 11.25% despite the stabilization of inflation

The facade of the Bank of Mexico (Banxico), in Mexico City. Moisés Pablo (CUARTOSCURO)

Given the persistent inflation in Mexico, the central bank decided to raise the target interest rate by 25 basis points, reaching a new all-time high of 11.25%.

Banks use the interest rate as a reference in their credit offer, that is, it is a measure of the cost of money in the country.

The Bank of Mexico, which works autonomously, has raised the rate 7% since June 2021, when a global inflationary spiral began, derived from the shocks of the pandemic.

"The Governing Board evaluated the magnitude and diversity of inflationary shocks and their determinants, as well as the evolution of medium- and long-term expectations and the price formation process," said the statement issued by the bank this Thursday.

“He considered the challenges faced by the tightening of global financial conditions, the environment of uncertainty, the persistence of accumulated inflationary pressures and the possibility of greater effects on inflation, as well as the monetary position that has already been reached in this bullish cycle” .

"Based on the above, and with the presence of all its members, it unanimously decided to increase the target for the overnight Interbank Interest Rate by 25 base points to a level of 11.25%," the institution reported.

"With this action, the rate of increases is reduced and the monetary policy stance adjusts to the trajectory required for inflation to converge to its target of 3% within the forecast horizon."

The statement also shows how Banxico's expectations regarding headline inflation improved compared to the last monetary policy decision, on February 9.

The bank expected inflation in the first quarter of the year to be 7.7%, and now it expects it to be 7.5%.

The institution estimates that inflation will close at 6.3% in the second quarter of the year.

Banxico's decision, as Banco de México is known, remains in line with the decision of the Federal Reserve in the US, which also raised its rate by 25 basis points last week.

This sustains an attractive rate differential between debt instruments in the US and Mexico, which has propelled the Mexican peso to be one of the currencies that have appreciated the most so far this year among emerging markets.

The collapse of three mid-sized banks in the United States, the purchase of troubled Credit Suisse bank in Europe, as well as raids on several global banks in Paris have raised jitters about the soundness of the banking system in financial markets.

"The Mexican peso, after exhibiting an appreciation, recently registered volatility due to the greater aversion to risk," said the Bank of Mexico.

"The difficulties faced by certain banking institutions in the United States and Europe have had a limited impact on the national financial system," the central bank said.

“Banking in Mexico comfortably complies with the regulatory requirements for liquidity and capitalization.

Banco de México will remain attentive to the evolution of events in the international financial markets and any possible impact on the local financial system,” he added.

subscribe here

to the

EL PAÍS México