Mexico raises its interest rate to an all-time high

The Central Bank of Mexico (Banxico) announced Thursday a new increase of 0.75 points to 9.25% of its reference interest rate, a historic maximum against inflation of 8.76% at its highest since 20 year.

This is the eleventh consecutive hike in the benchmark rate in an attempt to rein in demand and lower prices in Latin America’s second-largest economy, a member of the North American Free Trade Treaty with the United States. United States and Canada.

The Central Bank notes in its statement the persistence in Mexico of imbalance between supply and demand on various markets, and still high prices in the food and energy sectors.

The exchange rate was maintained at a stable level, welcomes the Central Bank (a dollar is exchanged against 20.17 pesos, without much change in one year).

Banxico expects inflation to converge towards the 3% target in the first quarter of 2024, but these forecasts are subject to risks.

The objective could be achieved if the intensity of the conflict in Ukraine decreases and supply chains work better.

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The central financial entity is also counting on a stronger effect than expected from the package against inflation announced by the government (regulation of basic food products, such as the emblematic tortilla, a true indicator of soaring prices, etc.).

The return to the objective could be compromised in the event, for example, of external inflationary pressures resulting from the pandemic.

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