Mexico central bank seen hiking rates after uptick in inflation
MEXICO CITY (Reuters) - Mexico’s central bank is seen raising its benchmark interest rate this Thursday to beat back persistently above-target inflation, matching an expected rate hike by the U.S. Federal Reserve, according to a Reuters poll.
Banco de Mexico is expected to hike its key rate MXCBIR=ECI by 25 basis points to 7.25 percent, a level not seen in nearly nine years, according to 17 of the 31 economists and analysts surveyed by Reuters as of 1800 GMT on Monday.
The remaining 14 specialists see the bank holding the key rate steady at its current 7.0 percent for the fourth straight monetary policy meeting.
Mexican annual inflation accelerated for a second consecutive month in November, climbing to its steepest rate since August, when it reached the highest level in 16 years.
The central bank will publish the rate decision on Dec. 14 at 13:00 local time (1900 GMT). It will be the first monetary policy meeting presided over by new governor Alejandro Diaz de Leon following the departure of Agustin Carstens to the Bank for International Settlements at the end of November.
In his first few days on the job, Diaz de Leon said Mexico’s inflation outlook had deteriorated in recent months, and warned inflation’s predicted downward path in 2018 could be affected by more possible shocks in the future.
Goldman Sachs economist Alberto Ramos said the uptick in inflation, renewed pressure on the peso and the bank’s focus on matching moves by the Fed will probably prompt a rate hike.
The Fed is expected to raise its main rate by 25 basis points on Wednesday.
Higher U.S. interest rates can sap demand for emerging market assets and Mexican policymakers will likely want to push up yields on Mexican debt in order to underpin the peso, which has been hit by concerns that U.S. President Donald Trump could pull out of a free trade deal with Mexico.
The expected hike is also likely due to “the fact that the new central bank governor may wish to forge his inflation fighting credentials and commitment to the inflation target by backing the recent inflation hawkish rhetoric with a rate hike,” said Ramos.