Mexico raises key rate to 10%

Banxico raised its interest rate for the fourth time in a row. This time it was proposed to raise it by 0.75%. Currently, the value in the central bank of Mexico has reached 10%. Opinions on this issue were divided, as Vice Chairman Gerardo Esquivel disagreed with the other four board members and supported an increase only by 0.5%.

The statistical report showed that core inflation reached a 22-year maximum in October. This figure did not take into account volatile commodities such as fuel. The decision for a raise was made after receiving the data from this report. Politicians are focusing on the continued rise in core indicators, while headline inflation seems to have peaked.

Pamela Diaz Lubet, economist at BNP Paribas SA said that Banxico is cautious due to insufficiently clear inflation data. Inflation needs to have a relatively stable downtrend in order to change behavior.

On Thursday, after the data was released, it became clear that U.S. inflation slowed more than expected in October. In addition, the consumer price index was up 7.7% from a year earlier. A month earlier the figure was 8.2%. This may serve as a reason for a less aggressive increase in interest rates by the FRS. Such a situation could appear ahead of this year's last Banxico meeting, which will be held on December 15.

Valeria Moy, director of the Mexican Competitiveness Institute believes that discussions about an increase by 50 basis points will start. According to her, Gerardo Esquivel voted for 50 basis points. In addition, the good data in the U.S. inflation report makes it possible to start talking about a smaller increase in the key rate.