The Mexican peso and the stock market retreated on Wednesday after the Federal Reserve delivered its third straight interest rate hike of three-quarters of a percentage point and signaled a high probability of at least one more move of that size this year.
The US central bank raised its target interest rate to a range of 3%-3.25%, the highest level since 2008, and new projections showed the official interest rate rising to between 4.25%-4.50% by the end of this year before peaking at 4.50%-4.75% in 2023.
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“Although the market had already fully discounted the increase of 75 basis points in the Fed’s target interest rate, what generated volatility in the financial markets was the increase in the interest rate expected by the members of the Fed for the closing of 2022 and 2023,” Banco Base said.
At the local level, the gaze of the participants is now set on the release of inflation figures on Thursday, which will offer additional clues about the next movements of the Bank of Mexico, whose next meeting is scheduled for September 29.
Mexico’s headline inflation reportedly paused its climb in the first half of September, although it would remain well above the official target, keeping intact expectations that the central bank will continue to raise its key rate, a Reuters poll showed on Monday.
The median of the projections of 17 participants showed an interannual rate of 8.71% for the National Consumer Price Index (INPC), down from 8.77% in the second half of August, when it reached its highest level since the end of the year 2000.
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Banco de México, which has a permanent inflation target of 3% +/- one percentage point, has increased the benchmark rate by 450 basis points in its last 10 monetary policy meetings to its current level of 8.5%.