By Anthony Esposito and Brendan O’Boyle
MEXICO CITY (Reuters) – The Bank of Mexico on Wednesday said it is not wed to hiking interest rates in line with the U.S. Federal Reserve and will evaluate future monetary policy moves on the basis of incoming information and bringing inflation to target.
There has been much market speculation on whether Banxico, as the Mexican central bank is known, will follow in lockstep with the Fed as it embarks on what’s become the sharpest round of U.S. rate hikes since the 1980s.
Banxico raised the benchmark interest rate by 75 basis points at its latest monetary policy meeting in August, mirroring the Fed, as inflation in Latin America’s second largest economy surged to an over two-decade high.
“We do not have a specific objective regarding the relative position with the Fed, and the trajectory of the rate will be the one that leads us to the convergence of our inflation target,” Banxico Governor Victoria Rodriguez said as she presented the bank’s latest quarterly report.
Rodriguez underscored the Fed’s actions were an important variable the bank took into consideration, but said it was far from the only one being carefully considered and that the bank’s five-member board would evaluate all available data as it comes in to make future decisions.
In an effort to tame spiraling inflation, Banxico has hiked rates by a total of 450 basis points over its last 10 monetary policy meetings, bringing the key rate to a record high of 8.5%.
Banxico’s quarterly report forecast 2022 gross domestic product (GDP) growth of between 1.7% and 2.7%, maintaining a previous central estimate for economic growth of 2.2%. The bank cut its forecast for 2023 economic growth, projecting an expansion of between 0.8% and 2.4%, from a prior view of 1.4% to 3.4%.
Asked about Fed chief Jerome Powell’s stark warning that the United States is headed for a painful period of slow economic growth and possibly rising joblessness as it raises interest rates to fight high inflation, Rodriguez said she did not foresee a U.S. or a Mexican recession.
“The context that we are living at a global level, of the pandemic and the war and the high inflation that is leading central banks to tighten their monetary stances, will have an impact on growth,” said Rodriguez. “However, not enough to bring it to recession levels.”
(Reporting by Anthony Esposito and Brendan O’Boyle; Editing by Andrea Ricci and Jonathan Oatis)
Source: One America News Network
