The Bank of Mexico just hiked interest rates.
Banxico, as the bank is usually called, hiked by 25 basis points to 6.50% in its latest interest-rate decision, as most economists were expecting.
Thursday’s decision marks the bank’s fourth consecutive rate hike since US President Donald Trump’s election in November.
The latest decision comes amid a recent recovery in the peso. The beleaguered currency has effectively rebounded to the level last seen on election day (as the currency was dropping against the dollar), and is up by about 5% since Trump’s inauguration, when it traded around 21.9550.
In a note to clients published ahead of the decision, Capital Economics’ Edward Glossop suggested that the bank may choose to hike by just 25 basis points this time around against the backdrop of the peso’s comeback.
Additionally, inflation has started to pick up recently: Mexico’s consumer prices rose by 4.86% year-over-year in February, after climbing by 4.72% in January.
This marks the eighth consecutive month the rate has accelerated, and it has now climbed to its highest level since March 2010. The pickup in inflation has been attributed primarily to rising energy costs following the government’s decision to raise gas prices by about 20% at the start of the year.
The Mexican peso is up by 0.4% at 18.6148 per dollar as of 3:05 p.m.
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