Bank of Mexico governor says pace of hikes may change as needed

The Bank of Mexico does not need to strictly track the U.S. Federal Reserves expected interest rates hike path and can tighten monetary policy at its own pace as it seeks to curb inflation, the central bank governor told Reuters on Friday.

The five board members of Banxico, as the central bank is known, voted unanimously to raise the benchmark interest rate by 50 basis points to 6.5% on Thursday, the seventh hike in a row. It was also the third straight 50-basis point increase.

“We are of course concerned first of all about the inflation we are observing,” Victoria Rodriguez, who took the helm at Banxico in January, said in an interview on the sidelines of an annual banking conference in the beach resort of Acapulco.

She noted the Feds policy trajectory was an “important variable” for Mexico but not the only one and that inflation has been rising for 15 straight months.

“It‘s not as if beforehand we have decided to match one by one” the Fed’s expected rate hikes, Rodriguez said.

Inflation hit 7.29% in the first half of March, slightly lower than the previous two-week period, but more than double Banxicos target rate of 3%. The bank has a one percentage point tolerance range above and below the target.

“We don‘t know yet if we’re going to maintain this pace (of rate hikes) or another. Itll be what is necessary to comply with our mandate of a 3% inflation target,” said Rodriguez.

Rodriguez expects inflation should peak during the first half of 2022 and then begin a downward trajectory towards target in the first quarter of 2024.

However, risks and uncertainty have risen following Russias invasion of Ukraine, which have fueled energy and grains price hikes.

“Regarding inflation there could be a significant impact…we will be paying attention to what happens and if we see an impact on inflation we will take the necessary measures,” said Rodriguez.

(Reporting by Anthony Esposito; Editing by Sandra Maler and Sam Holmes)