Weekly Report - 29 June 2017 (WR-17-25)

MEXICO | Another interest rate increase. On 22 June, the central bank (Banxico) increased its benchmark interest rate by 25 basis points to 7%, its highest level since 2009. A Banxico statement said that its board of directors adopted the majority decision to increase the benchmark interest rate as part of its efforts to prevent inflation contagion “and to anchor inflation expectations”, as Mexico’s economy continues to adapt to various shocks such as the sustained depreciation of the Mexican peso against the US dollar since mid-2014, the liberalisation of petrol prices in the domestic market, and the increase in the minimum salary decreed by the government led by President Enrique Peña Nieto at the start of the year. These shocks have pushed the national inflation rate in Mexico to 6.3% to the first half of June, double Banxico’s inflation target of 3%.

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