Mexico City, Mexico — On Thursday, the Bank of Mexico (Banxico) raised its reference interest rate by 50 base points to 10.5 percent. The rate was raised in an attempt to mitigate inflation that remains at high levels despite having moderated in November.
Banxico’s Governing Board decided, by majority of 4 to 1, to increase the target for the Overnight Interbank Interest Rate by 50 base points to a level of 10.50 percent, effective as of December 16, 2022.
This is the thirteenth consecutive increase in the reference rate, seeking to contain inflation that in November, stood at 7.8 percent.
“With this action, the monetary policy stance adjusts to the trajectory required for inflation to converge to its 3% target,” the monetary institution said in a statement.
Banxico explained that although general inflation moderated in November, subjacent inflation, which eliminates volatile elements such as energy and food, maintained its upward trend to settle at 8.51 percent.
The bank explained that inflation still presents upward risks due to the pressures derived from the coronavirus pandemic and an exchange depreciation or “pressure on agricultural and energy prices due to the geopolitical conflict” between Russia and Ukraine.
They added that inflation could moderate going forward if there is a greater than anticipated weakening of the global economy, a decrease in the intensity of the conflict between Russia and Ukraine, or better functioning of supply chains.
The bank announced that “it will still be necessary to increase the reference rate” at its next monetary policy meeting, scheduled for February 9, 2023. The bank expects consumer prices to converge to their 3 percent goal in the third quarter of 2024.