Mexico’s inflation is taking longer than expected to slow, Central Bank Governor Victoria Rodriguez Ceja said after leading a bigger-than-expected interest rate increase that shocked investors on Thursday.
(Bloomberg) — Mexico’s inflation is taking longer than expected to slow, Central Bank Governor Victoria Rodriguez Ceja said after leading a bigger-than-expected interest rate increase that shocked investors on Thursday.
The economy’s complex environment has put an extra upward pressure on the country’s core inflation, Rodriguez said in an interview with Imagen Radio, referring to the price measure that strips out volatile items. The balance of risks for the inflation trajectory remains biased to the upside, she added.
“Significant pressures remain, we are seeing it especially in food and services that are having a slower decline than expected,” Rodriguez said late Thursday. “Core inflation has continued to face upward pressures.”
Read More: Banxico Stuns Markets With Big Hike to Tackle Inflation Woes
Banxico, as the Mexican central bank is known, earlier in the day raised its key rate by 50 basis points to a record 11%, a hawkish turn that no top economist predicted. The peso jumped on the surprise decision, as most investors had expected the bank to slow the pace of tightening to a quarter point.
The decision also meant for Banxico to break a series of increases in tandem with the US Federal Reserve. The Fed delivered a quarter-point increase last week, leading analysts to forecast that Mexico would match its northern neighbor for the seventh straight decision.
During the interview, Rodriguez said that inflation dynamics between Mexico and the US are “very different” and that Mexico doesn’t have an interest rate differential target with the Fed. Although it’s an important element, Banxico doesn’t per se follow the US central bank, she said.
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