MEXICO CITY, Feb 10, 2022 (AFP) – Mexico’s central bank on Thursday raised its benchmark interest rate for a sixth consecutive time in an attempt to cool red-hot inflation.

The governing board decided to increase the interbank rate by 50 basis points, to 6.0 percent, the Bank of Mexico said in a statement.

“Global economic activity continued to recover in the fourth quarter of 2021, albeit at a slower pace and with differences between countries due to the evolution of the pandemic and the actions of health, monetary and fiscal authorities,” it said.

“Global inflation continued to rise, pressured by bottlenecks in production… high prices of food and energy, as well as the recovery of some services.”

This had raised expectations of a quicker withdrawal of global monetary stimulus, the central bank said.

Inflation stood at 7.36 percent year-on-year in December in Mexico — close to a 20-year high and more than double the central bank’s target of around 3.0 percent.

“Inflationary pressures have been greater in magnitude and duration than anticipated,” the central bank said.

Mexico’s economy, the second-largest in Latin America, slipped into a technical recession at the end of last year, contracting for a second straight quarter, according to preliminary official data.

The Bank of Mexico “finds itself in a difficult situation facing the central bank’s nightmare of stagflation,” analysts at Dutch financial group Rabobank wrote in a research note.

“We maintain the view that the Bank will slow down the pace of tightening after this meeting and we expect another three 25-basis-point hikes before the end of the cycle,” they added.

[embedpost slug=”eu-looks-to-start-health-union-with-joint-declaration/”]