The Bank of Mexico or Banxico raised the interest rate to 5% this Thursday, November 11, which represents the fourth consecutive increase of 25 basis points from the target amid the highest inflation since 2017.

You previously made interest rate adjustments on June 24, August 12, and September 30.

The Governing Board of the central bank approved this decision with a vote in which four members supported the new rate and only one of them, Gerardo Esquivel, was in favor of maintaining the rate at 4.75%, a position similar to that of his other votes.

"It was considered necessary to continue strengthening the monetary stance, adjusting to the path required for inflation to converge to its target of 3% within the forecast horizon," argued the board in its statement.

The forecasts for headline and core inflation were revised up, especially those for the short term. Now the Bank of Mexico expects inflation to close to 6.8% by 2021, beyond the 6.2% it estimated at its September meeting.

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Analysts were already expecting this decision after it was revealed on Monday that the general inflation rate in Mexico rose in October to 6.24% year-on-year, its highest level since the end of 2017.

“The shocks that have affected inflation are mainly temporary. However, the horizon in which they could affect it is uncertain, they have impacted a wide type of products and their magnitude has been considerable ”, he justified.

The Governing Board attributed inflation to global pressures due to bottlenecks in production, stimulus to spending, and higher food and energy prices.

In the national financial markets, the autonomous body pointed out the "volatility and certain depreciation" of the exchange rate, which remains above 20 Mexican pesos per dollar.

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He also recalled the 0.2% quarterly contraction from July to September estimated by the National Institute of Statistics and Geography (Inegi).

"Although it is expected to resume its recovery from the fourth quarter. An uncertain environment remains and slack conditions are expected, with marked differences between sectors ”, indicated Banxico.

As risks to the upside, the central bank stated external inflationary pressures, cost pressures, the persistence of core inflation, exchange rate depreciation and a greater increase in agricultural and energy prices.

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