The Central Bank of Mexico (Banxico) on Thursday raised its benchmark interest rate by 25 basis points to 4.5% recognizing an increase in inflation.
“Although the shocks that have affected inflation are expected to be transitory, due to the diversity, magnitude and the extended horizon in which they have affected it, they may pose a risk to the formation of prices,” the institution said in a statement.
This is the second consecutive increase in the benchmark interest rate after the bank decided to take it to 4.25% at the end of June.
Read: Onion, LP gas and tour packages increased in price in July; inflation stands at 5.75%
The bank’s decision had been anticipated by analysts, who now expect rate hikes to continue in the coming months.
“The cycle of hikes will continue gradually from this point on. (…). We expect hikes of 25 basis points at each of the following meetings, so the rate would be at 5.5% in the first quarter of 2022,” British firm Capital Economics said in a report to clients.
The central bank had begun in August 2019 a cycle of interest rate cuts that extended through 2020 as the coronavirus pandemic hit the Mexican economy, the second largest in Latin America after Brazil.
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