Mexico, Peru set to extend interest rates

Bloomberg

Mexico and Peru are forecast to extend their biggest-ever series of interest rate rises as they struggle to contain a
rebound in price gains.
In Mexico, the central bank’s inflation goals have been hampered by soaring food costs, while Peru’s policymakers are trying to keep the economy stable amid the mass unrest which has paralysed swathes of the Andean nation for two months.
Both central banks are expected to raise interest rates by a quarter percentage point. Although they are seen as nearing the end of a phase of monetary tightening which began in mid-2021, the persistence of inflationary pressure means they haven’t yet been able to follow Brazil and Chile and call a halt to rate increases.
Mexico’s central bank, known as Banxico, will match the US Federal Reserve for a seventh straight decision,
according to all 24 analysts
surveyed by Bloomberg.
who anticipate a quarter-point hike to take the key rate to 10.75%.
Such move “is practically a done deal,” said Janneth Quiroz Zamora, vice president of economic research at Monex Casa de Bolsa. “Banxico has stayed in tandem with them since the Fed started its tightening cycle.”
The Fed’s decision to slow its tightening to a quarter percentage point last week means analysts now expect Mexico to follow suit. The country often tries to maintain an interest rate differential over its northern neighbor to prevent destabilizing outflows of capital.
Economists will be watching for guidance on whether the Mexico could stop following the Fed over its next meetings, after Fed Chair Jerome Powell said he expected “a couple” more hikes in the US.
Mexico’s annual inflation accelerated to 7.91% in January, matching the median forecast of analysts surveyed by Bloomberg, the country’s statistics institute said Thursday prior to the rate announcement.
Banxico Deputy Governor Jonathan Heath told Bloomberg News last month that he “intuitively” saw the cycle ending between 10.75% and 11.5%.