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Market Wire - Banxico Hikes 50 Basis Points, Peso Steadies

CalendarFebruary 10, 2022
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Karthik Sankaran, Senior Market Strategist, ksankaran@cambridgefx.com The Central Bank of Mexico (Banxico) delivered a 50-basis point hike, taking benchmark interest rates to 6.0 percent, with the likelihood of more to come. The move was fully in line with the expectations of 19 of 22 polled economists. It comes after January data released yesterday showed the annualized pace of core inflation above 7.0 percent, well over Banxico’s 3.0 percent inflation target.

The meeting was the first outing for new Banxico head Victoria Rodriguez Ceja, whose move from her prior position as a deputy at the Finance Ministry was criticized for a lack of central banking experience. At her appointment, Rodriguez emphasized her commitment to Banxico’s inflation targeting framework and today she joined other members in the 4-1 decision. Gerardo Esquivel, who had favored a 25-basis point hike at the last meeting registered a similar dovish dissent today.

The hike comes as data shows Mexico fell into recession last year. However, Banxico’s forecasts moved up inflation projections and the statement noted that the “balance of risks for the trajectory of inflation within the forecast horizon remain biased to the upside.” The Mexican peso weakened slightly after the move, but it has held up better against the dollar than its peers in the wake of St. Louis Fed President James Bullard’s hawkish calls for a 50-basis point hike at the March Fed meeting.

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