The central bank announced this afternoon that its main interest rate rises from 7% to 7.75% to try to stop the most powerful inflation in 21 years.
Investors and analysts had already discounted the 75 basis point increase.
In January 2008, Banxico established the rate as the main instrument to combat inflation and, until this Thursday, the largest increase applied had been 50 basis points.
Before 2008, the central bank used “the short” as the main tool to carry out monetary policy in Mexico, through which it set the interest rate in the market, injecting or withdrawing liquidity from the system.
Banxico’s higher rate seeks to try to contain inflation and its expectationsby increasing the cost of bank loans and their supply, which brings with it lower consumption and investment.
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