Mexico central bank hikes policy rate by 50 bps to 6.5%

Mexico's central bank announced on Thursday that it hiked its policy rate by 50 basis points to 6.5% following its march meetings, as expected.

Key takeaways from policy statement

"Board was unanimous on rate decision."

"Available indicators suggest that the Mexican economy might have resumed its recovery during early 2022."

"With this action, the monetary policy stance adjusts to the trajectory required for inflation to converge to its 3% target within the forecast horizon."

"An environment of uncertainty and ample slack conditions prevails, although the latter is expected to be less ample than in the previous quarter."

"Medium-term expectations for headline inflation were revised upwards at the margin, while those for core inflation were left unchanged and longer-term expectations have remained stable at levels above the target."

"For the next monetary policy decisions, the board will monitor thoroughly the behaviour of inflationary pressures and factors impacting foreseen path for inflation and its expectations."

"Given greater inflation pressures, forecasts for headline and core inflation were revised significantly upwards for the entire horizon and convergence to the 3% target is now expected to be attained in the first quarter of 2024."

"In addition to shocks that have affected inflation throughout the pandemic, there are pressures associated with the geopolitical conflict."

"Balance of risks for the trajectory of inflation within the forecast horizon has deteriorated and remains biased to the upside."

Market reaction

The USD/MXN pair showed no immediate reaction to the rate hike decision and was last seen losing 0.4% on a daily basis at 20.1325.