Bank of México: hikes rate. Bank of México: another rate increase.

Higher inflation sparks interest rate hike

Bank of México raises interest rate to 6.25% after gas price increases fuel inflation

With inflation running at higher than targeted levels the Bank of México raised its benchmark interest rate yesterday by 50 basis points to 6.25%, the highest in nearly eight years.

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Annual inflation reached 4.72% last month, the highest in more than four years, fueled by the January 1 fuel price increases that hiked the price of gasoline by as much as 20%. But the increase over December’s figure of 3.36% was the biggest in 21 years.

The central bank said it raised rates to avoid “consumer price contagion” after the gas price hike and to hold down inflation. It said the outlook for growth and inflation had worsened but the impact of higher gas prices was likely to be temporary.

The bank’s move was in line with analysts’ expectations. The benchmark interest rate was raised five times last year to counter inflationary pressures brought on by a weak peso as it attempted to keep inflation in line with its target range of 2-4%.

Some economists are forecasting inflation will reach as much as 5.32%, Bloomberg reported yesterday.

Source: Reuters (en), El Economista (sp), Bloomberg (en)

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  • miabeach

    The Frito Bandito’s who call themselves Mexico’s ruling class has a sombrero full of trouble now and it won’t end quietly. The bandits have been stealing so much money there’s simply no cushion to fall back on. I suspect there will be a rash of one way plane tickets bought to Miami. All them fancy condos will soon be owner occupied.

  • Jumex

    This is about how Venezuela looked as they spiraled into their collapse.

  • Donald Godier

    Government control of the economic engine always ends in failure, ripping off 20% from every transaction will never create economic growth and stokes inflation, VAT’s are always regressive increasing prices of goods by 40 to 60%

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