Mexico: Banxico stays put, turns more hawkish amid rising inflation
October 26, 2012
At its 26 October meeting, the Central Bank (Banxico) left the monetary policy rate unchanged at 4.50% in a decision that was expected by the market. The Bank last adjusted interest rates in July 2009. Banxico centred its attention on the recent inflation spike and highlighted the "transitory nature" of the agricultural price shock driving the increase. The Bank noted that inflation expectations remain anchored and that it remains confident that the recent increase will not translate into second-round effects. However, despite leaving its policy stance unchanged, Banxico turned significantly more hawkish, warning that "if shocks to inflation persist, even if deemed transitory, and changes in the trend for the general and core inflation are not confirmed", the Bank will consider raising interest rates in order to ensure the anchoring of inflation expectations. The Bank now expects inflation to end the year "very close to 4%" and to gradually converge to the permanent inflation target of 3% in 2013.