Mexico's central bank headquarters. Mexico's central bank headquarters.

Central bank raises benchmark rate to 7%

But the Bank of México hinted that it may be the last in a cycle of rate increases

The Bank of México raised its benchmark interest rate today from 6.75% to 7%, an increase that some analysts are saying is probably the last in a cycle.

The central bank said in a statement that “the reference rate has reached a level that is consistent with the process of efficient convergence of inflation to the 3% target.”

That, said Nomura Holdings economist Benito Berber told Bloomberg, can be interpreted to mean “the hiking cycle is over.”

He said by Bank of México standards the message was “as close as you get to a signaling saying ‘This is done.’ Which is pretty interesting.”

It was the seventh consecutive increase in borrowing costs and was in line with economists’ expectations.

Those were fueled by the announcement yesterday by Inegi, the national statistics agency, that inflation for the year to mid-June was 6.3%, the highest since 2009.

Finance Secretary José Antonio Meade said yesterday the cycle of rate hikes was probably nearing its end, and that interest rates might come down at the end of the year.

Central bank chief Agustín Carstens has forecast that inflation will drop in the second half of this year.

The peso has gained to the point where it has seen the best performance among major currencies this year, Bloomberg reported, as concerns over new protectionist measures by the United States have declined.

Source: Bloomberg (en), Reuters (en), Milenio (sp)

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