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Mexico Monetary Policy February 2022

Mexico: Banxico delivers sixth consecutive rate hike in February

On 10 February, the Governing Board of the Bank of Mexico (Banxico) opted to raise the target for the overnight interbank interest rate by 50 basis points to 6.00%, marking the sixth consecutive hike.

The Bank’s decision was part of an ongoing attempt to keep inflation under control and stop inflation expectations from becoming de-anchored. While headline inflation dipped in January, it was still well above the Bank’s 3.0% target, and core inflation rose in the month. Moreover, both the market’s and Banxico’s inflation expectations for 2022 increased, with the Bank commenting that risks to the inflation outlook were to the upside. Another factor behind the decision to hike was likely the Federal Reserve’s more hawkish monetary stance, which risks putting downward pressure on the peso.

In its communiqué, Banxico did not provide explicit guidance on future rate movements, but reiterated that it would “monitor thoroughly inflationary pressures” going forward. Our panelists anticipate that further monetary tightening is highly likely ahead in order to dampen inflation.

The next monetary policy decision will be announced on 24 March.

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