Exclusive-Bank of Mexico’s rate hike cycle not over, deputy governor says

October 4, 2021

By Anthony Esposito

MEXICO CITY (Reuters) -The Bank of Mexico’s cycle of rate hikes is not yet over and one or two increases are likely forthcoming amid concerns about inflation, though any monetary policy moves will depend on incoming data, Deputy Governor Jonathan Heath said on Monday.

Expressing concern about above-target inflation, Banxico, as the bank is known, raised its benchmark interest rate by 25 basis points to 4.75% on Thursday, as expected, in a four-to-one vote by its governing board. Heath voted with the majority for the rate hike.

“This is my personal opinion, that the cycle of hikes is not over yet, that perhaps we’re not too far from the end. Of course, this will depend much on the evolution of many different indicators,” Heath told Reuters in an interview.

“I think that we should still maybe see one or two more (rate) hikes,” said Heath.

Mexican consumer prices during the first half of September rose 0.42% to reach an annual inflation rate of 5.87%, above the 5.59% for August and far above Banxico’s target rate of 3% plus or minus one percentage point.

Heath said that for the full month of September annual headline inflation was likely “very near” 6%, and core inflation, which strips out some volatile food and energy prices, could be near 5%.

The INEGI national statistics agency will publish September inflation data on Thursday.

Inflation will likely peak in February or March and start to decline in the second quarter of 2022 and reach the bank’s 3% target in the third quarter of 2023, Heath said.

(Reporting by Anthony Esposito; Editing by Cynthia Osterman)

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