Banxico has the constitutional mandate to keep inflation at levels of 3% +/- one percentage point.
Since last year, the central bank has increased the reference rate by 300 points to 7% last May.
Now, with inflationary pressures coming from abroad due to the lockdowns in China as well as the escalation of the war in Russia and Ukraine, Banxico is expected to increase the rate by 75 basis points.
The Citibanamex Expectations Survey showed that a majority expects that there will be “forcefulness” with an increase in the reference rate to 7.75%, while other participants still consider that the rise may be only 50 basis points.
In the minutes of the latest monetary policy decision, Deputy Governor Irene Espinosa stressed that it was necessary to act “forcefully” in raising rates to prevent expectations from becoming unanchored and so that Banxico does not lose credibility.
The governor of the bank, Victoria Rodríguez, said last week -in the presentation of the quarterly report- that, if necessary, the rate could be raised above the historical increases while the deputy governor Gerardo Esquivel said that an increase of 75 basis points is on the table, but that was not a decision made.
The latest projections of the issuing entity point to inflation reaching levels close to its 3% target in the first quarter of 2024.
