The Bank of Mexico hiked its key interest rate by 75 basis points to a record 10.00% on Thursday, in a split decision that left the door open to future hikes but cast doubt on how aggressively it would continue its monetary tightening cycle.
In a departure from recent decisions, the bank's five board members did not vote unanimously for the increase, with Deputy Governor Gerardo Esquivel voting to hike the key rate by 50 basis points.last month he saw the bank's current rate-hiking cycle ending with rates between 10% and 10.25%, while a central bank survey of analysts last month predicted Mexico would end 2022 with a rate of 10.50%.
The bank has raised its target rate by 600 basis points since June 2021, as inflation has blown past its target rate of 3%, plus or minus one percentage point.in a news conference that raising rates could slow down the economy. Banxico reiterated that inflation is projected to converge to its 3% target in the third quarter of 2024, and added that forecasts for average annual inflation for the fourth quarter now stand at 8.3%, down from a prior view of 8.6%.
Banxico's recognition of "subsiding" shocks, as well as the board's split decision, indicate that "the board may be becoming a little less hawkish," said Jason Tuvey, senior emerging markets economist at Capital Economics.
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