Mexico central bank raises key rate to 7.25 percent
Mexico City, (MILLAT ONLINE):Mexico’s central bank Thursday raised its key rate by 25 basis points to 7.25 percent, faced with a rebound in consumer prices in November in the third-largest economy in Latin America.
“The landscape in terms of inflation has become more complicated,” the central bank said in a statement.
It was the bank’s first meeting since Alejandro Diaz de Leon took the helm, replacing Agustin Carstens.
Inflation reached 6.63 percent in November, close to its 16-year record, while prices in the energy sector as well as fruits and vegetables are rising, and the peso is suffering from depreciation.
The central bank has already had to raise the key rate several times in recent months.
“Inflation should begin to fall from January, as the effects of this year’s fuel price hikes and the sharp drop in the peso that followed President (Donald) Trump’s election drop out of the annual comparison,” said Neil Shearing, the chief emerging markets economist at Capital Economics.
“But it’s clear that Banxico (the central bank) has re-doubled its focus on inflation. If the peso were to fall again next year — either on NAFTA or election concerns — it wouldn’t take much for the central bank to move again,” Shearing said.
Mexico is currently engaged in tough negotiations with the US and Canada over the North American Free Trade Agreement, which Trump has sharply criticized.