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Mexico Monetary Policy September 2021

Mexico: Banxico delivers third consecutive rate hike in September

On 30 September, the Governing Board of the Bank of Mexico (Banxico) opted to hike the target for the overnight interbank interest rate by 25 basis points to 4.75%, following August’s 25 basis-point increase. The move marked the third consecutive hike, but was not unanimous as one board member voted to keep rates constant.

The Bank’s decision was a further attempt to keep inflation under control, as both headline and core inflation have remained well above the Bank’s 3.0% target recently. Additionally, market projections for both headline and core price pressures for 2021 have increased again, while the Bank’s own revised expectations see higher inflation in the coming months than previously anticipated. Consequently, Banxico increased the rate in a bid to help inflation converge to its target and to avoid inflation expectations becoming de-anchored.

Looking ahead, Banxico did not provide hints on forward guidance and struck a neutral tone. It did, however, state that policy decisions will continue to be based on returning the inflation rate to target. While our panelists are currently taking into account the Bank’s recent move, most see room for more hikes in the remainder of the year.

The next monetary policy decision will be announced on 9 November.

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