Thursday, December 7, 2023

Interest rates rise again to record high of 10%

As expected, the Bank of México (Banxico) lifted its benchmark interest rate by 75 basis points to a new record high of 10% on Thursday.

Four of five Banxico board members supported a fourth consecutive 0.75 percentage point hike, while Deputy Governor Gerardo Esquivel voted in favor of a more modest 0.5% increase.

The decision came a day after the national statistics agency INEGI reported that annual headline inflation eased slightly to 8.41% in October, but core inflation rose to a 22-year-high of 8.42%.

Banxico said in a statement that “accumulated pressures associated with both the pandemic and the military conflict [in Ukraine] have continued to affect headline and core inflation.”

It said that the central bank board “evaluated the magnitude and diversity of the shocks that have affected inflation” and “considered the increasing challenges for monetary policy stemming from the ongoing tightening of global financial conditions [and] the environment of significant uncertainty,” among other factors.

“… Based on these considerations, the board decided by majority to raise the target for the overnight interbank interest rate by 75 basis points to 10.00%. With this action, the monetary policy stance adjusts to the trajectory required for inflation to converge to its 3% target within the forecast horizon,” Banxico said.

“The board will thoroughly monitor inflationary pressures as well as all factors that have an incidence on the foreseen path for inflation and its expectations … with the objective of setting a policy rate that is consistent at all times,” with two goals, the national bank said: making steady, timely progress toward a headline inflation target of 3% while taking into account the impact on the economy and financial markets.

The Bank of México has now raised its key rate by 6 percentage points since June 2021, when the current tightening cycle began. Each of its four 75 basis point hikes followed increases of the same size by the United States Federal Reserve.

Mexico News Daily 

Have something to say? Paid Subscribers get all access to make & read comments.

Asylum applications in Mexico hit historic numbers this year

The applications through November surpass the previous yearly record, with most asylum-seekers coming from Cuba, Haiti and Honduras.

New ‘home office law’ takes effect in Mexico

Regulation approved in June for remote workers in Mexico, including reimbursements and the right to disconnect, went into effect on Tuesday.
Tesla vehicles on a trailer

Got 1 min? Elon Musk says ‘next-gen’ Tesla vehicles to be made in Mexico

In an interview, Musk said the manufacturing innovations of Tesla's low-cost electric vehicles will "blow people's minds."