Mexico tries to tame inflation with another big rate hike

Mexico’s central bank announced Thursday another sharp increase in its benchmark interest rate to try to bring down the highest inflation in more than two decades.

The governing board’s decision to raise the interbank rate by three-quarters of a per centage point to 8.5 per cent was unanimous, the Bank of Mexico said. It was the 10th consecutive hike and the second in a row of such a magnitude.

“Accumulated inflationary pressures derived from the pandemic and the war (in Ukraine) continue to affect general and underlying inflation,” the central bank said in a statement.

Like many countries Mexico is grappling with rising consumer prices that are increasing the cost of living.

Inflation in Latin America’s second-largest economy reached 8.15 per cent year-on-year in July -- the highest since 2000, according to official figures.

That was well above the central bank’s target of around 3.0 per cent

The Bank of Mexico signaled that the size of any further interest rate increase in would depend on whether inflation eases.