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Bank of Mexico Hikes Interest Rate to 10.50%, Signal Another increase Coming

Published: December 15, 2022
A couple walk in front of the Bank of Mexico building adorned with Mexican national flags in Mexico City on Sept. 13, 2020. (Image: ALFREDO ESTRELLA/AFP via Getty Images)

The Bank of Mexico raised its key interest rate by an expected 50 basis points to a record 10.50% on Thursday, tempering its monetary tightening pace amid a slowdown in inflation while suggesting it could hike rates at least one more time.

The split decision follows four consecutive 75-basis-point hikes and comes after the U.S. Federal Reserve raised its key interest rate by 50 basis points Wednesday after four consecutive hikes of its own of three-quarters of a percentage point.

Four of the bank’s five board members voted in favor of the half a percentage point hike, with member Gerardo Esquivel casting the lone vote for a 25 basis-point increase.

“The board considers it will still be necessary to raise the reference rate in its next monetary policy meeting,” said Banxico, as the Mexican central bank is known. “Subsequently, it will assess if the reference rate needs to be further adjusted as well as the pace of adjustments based on the prevailing conditions,” it added.

Mexico’s headline inflation in November slowed to 7.8 percent, its lowest level since May.

However, annual core inflation, which strips out some volatile food and energy prices, rose to 8.51%, foreboding more monetary policy tightening as Banxico works to get inflation to its target of 3 percent, plus or minus one percentage point.

Banxico has now raised its benchmark 650 basis points since June 2021.

By Reuters (Reporting by Brendan O’Boyle; Editing by Anthony Esposito)