Banxico raises the benchmark interest rate 25 basis points to 4.25%

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The central bank of Mexico (Banxico) announced Thursday that it raised the benchmark interest rate by 25 basis points to 4.25%. Investors expected Banxico to leave its policy rate unchanged at 4%.

Market reaction

With the initial market reaction, the pair USD/MXN it fell sharply and was last seen shedding 1.85% on the day at 19.7915.

Featured statements from the policy statement summarized by Reuters

“The board was not unanimous in the rate decision.”

“2 board members voted to keep the rate stable at 4.0%.”

“The balance of risks for inflation is biased upward.”

“Headline inflation is now expected to converge to the 3% target during the third quarter of 2022.”

“The shocks that have affected inflation are expected to be transitory in nature.”

“It was considered necessary to strengthen the monetary policy stance to avoid adverse effects on inflation expectations.”

“The Mexican economy recovered notably in March and moderately in April.”

“The Mexican economy is expected to resume its recovery during the rest of the year.”

“The risk balance of risks to growth is balanced.”

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