Banxico hikes overnight rate by 50bps to 6%, as expected

Banxico hikes overnight rate by 50bps to 6%, as expected, as it sought to keep price pressures in check with inflation running hot.

The central bank explained that the board was not unanimous on rate decision with 4 board members that voted to hike the key rate to 6.0% with1 board member that voted to hike the key rate to 5.75%.

The central banks said inflationary pressures have been greater and have lasted longer than anticipated and that the board will closely watch inflationary pressures in upcoming monetary policy meetings.

The inflation expectations for 2022 and 2023 increased again, while medium-term expectations decreased slightly and those for longer terms have remained stable at levels above the target.

The forecasts for headline and core inflation were revised upwards, especially for 2022 and the first quarter of 2023.

The central bank says that  the balance of risks for the trajectory of inflation within the forecast horizon remains biased to the upside.

The central bank says it  evaluated magnitude, diversity of shocks that have affected inflation and its determinants, along with the risk of medium - and long-term inflation expectations and price formation becoming contaminated.

USD/MXN is unchanged on the move whereby the US inflaiton data has played a bigger role in the currency pair's volatility on the day. USD/MXN has ranged between a low of 20.3492 and a high of 20.57.5740.