Mexican central bank will raise the key rate to a record 9.25%

A Reuters poll on Monday showed that the Bank of Mexico (Banxico) is expected to increase its basic interest rate this week to a record point of 9.25%, which is a consequence of the US Federal Reserve's recent 75 bps increase in response to persistently high inflation.

Twenty out of twenty analysts polled expect Mexico's central bank to raise its base rate by three-fourths of a percentage point on Thursday, from 8.50% to 9.25%, the third consecutive rate hike by such a move.

“In an environment of continued pessimism in financial markets, and given expectations of more tightening from the Fed, we expect Banxico to try to remain cautious while helping to promote greater local stability,” Grupo Financiero Banorte said.

In the current hiking cycle that began in June 2021, Banxico's target rate has grown by 450 basis points as inflation exceeded the bank's target rate of 3%, plus or minus one percentage point.

Inflation in Mexico continues to reach its highest level in decades. Official data last week showed that the annual inflation rate in Latin America's second-largest economy reached 8.76% in the first half of September.

On Friday, Mexican President Andres Manuel Lopez Obrador said the government would announce new measures to curb inflation following an agreement with companies to maintain prices for basic foodstuffs.

The monetary policy statement will be released by the Mexican central bank on Thursday at 1 p.m. local time (18:00 GMT).