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Mexico Monetary Policy February 2023

Mexico: Banxico surprises markets by delivering a 50 basis point hike in February

At its meeting on 9 February, the Governing Board of the Bank of Mexico (Banxico) delivered another 50 basis-point hike, raising the overnight interbank interest rate target to 11.00%. The move surprised analysts; markets had priced in a 25 basis-point increase. Banxico has now increased its rate by 550 basis points since January 2022.

The tightening was aimed at containing headline and core inflation, both of which are currently well above the Central Bank’s 3.0% target. Additionally, Banxico’s decision was supported by its upward revision of headline and core inflation forecasts; both are seen remaining above target through end-2024.

Concerning forward guidance, the Bank stated that its next decision would depend “on the evolution of incoming data” and that it may deliver a smaller hike at its 30 March meeting.

Jessica Roldán, chief economist at Casa de Bolsa Finamex, commented:

“Today’s news supports our view that inflation dynamics are deteriorated, that rates will be at high levels for longer and that a catch-up to the upside in inflation expectations is pending.”

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