Mexican central bank surprises with a 25 bps rate hike

Author: Adam Button | Category: Central Banks

Mexican central bank delivers a surprise hike

USDMXN chart
The consensus was for no move off the 4.00% overnight rate but, in a split decision, the Banxico opted to hike rates to 4.25%. There were two members who voted for no change.

The peso has jumped on the decision, with USD/MXN down to 19.73 from 19.97 beforehand.

The decision to hold at 4.00% in May was unanimous but inflation data in the most-recent report was higher. Today's jobs data also showed unemployment at 3.99% compared to 4.47% expected and 4.65% in April.

The Banxico said they expect headline inflation to hit its 3% target in Q3 2022 and that the magnitude and length of CPI shocks may pose threats. However, in a nod to a wait-and-see approach, they said risks are balanced.

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