Mexicos Central Bank Holds Rates, Some See Hikes Coming

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MEXICO CITY, May 13 Reuters Mexicos central bank on Thursday kept its key interest rate steady in a unanimous decision by its fivemember board that reflected growing concerns about the path of inflation and triggered speculation the next move would be a hike.

For the second meeting in a row, the Bank of Mexico, known locally as Banxico, kept the rate unchanged at 4.0, after cutting it by 25 basis points in February.

Banxico said that inflation expectations for 2021 had risen since its last monetary policy meeting and that the balance of risks for prices had an upward bias.

Economists said this meant the end of the easing cycle that extended through last year as the bank tried to limit the economic damage of the pandemic.

The next rate move is most likely a hike rather than a cut, Goldman Sachs Alberto Ramos said. Recent domestic and external developments have been shortening the horizon for liftoff.

J.P. Morgan said it expected two 25 basis points rate hikes in the fourth quarter to 4.5.

Ramos said he expects Banxico to keep rates at 4.0 until at least the end of 2021, barring a deterioration of the domestic policy backdrop or an intensification of the hawkish external monetary headwinds.

The U.S. Labor Department on Wednesday reported that the U.S. consumer price index rose 4.2 in the 12 months through April, the largest gain since September 2008, surprising the Federal Reserve. High U.S. inflation pressures prices in Mexico, its top trade partner, while U.S….

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