According to a Reuters poll on Monday, all 20 analysts surveyed expect the Bank of Mexico, known as Banxico, to hike its benchmark interest rate by 25 basis points on Thursday, but at a more moderate pace due to inflation showing signs of cooling. This would mark the 15th consecutive rate hike by Banxico, raising the key rate to 11.25%.
In February, the central bank increased the key rate by 50 basis points to 11.00%, which was unexpected by the market, citing a complex inflation scenario. However, Banxico hinted that future rate hikes could be smaller, indicating that its rate-hiking cycle was not over. Since June 2021, Banxico has raised its key interest rate by 700 basis points to combat inflation.
On Thursday, official data showed that Mexican consumer prices rose less than expected in early March, with annual headline inflation at 7.12%, down from 7.48% in the second half of February. This has led to speculation that Banxico may slow the pace of its rate hikes.
The decision by Banxico comes after the U.S. Federal Reserve raised interest rates by a quarter of a percentage point last week. However, the Fed indicated that it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets caused by the collapse of two U.S. banks.
