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The Board of Governors of the Central Bank of Mexico (Banxico) agreed Thursday, Aug. 11, to raise the key benchmark interest rate for the 10th consecutive time, in anticipation of higher inflation in the short term.

The new rate is 8.5 percent.

Five members of the board voted unanimously to increase the target for the overnight interbank interest rate by 75 basis points to 8.5 percent, effective Friday, Aug. 12.

In addition, the bank raised its inflation forecast for the end of the year to 8.1 percent.

According to Banxico, global inflation continues to rise, and in some cases has reached its highest level in decades, as imbalances between demand and supply persist in several markets and prices remain high for both food and energy.

In Mexico, the accumulated inflationary pressures derive from the covid-19 pandemic, as well as the Ukraine crisis and government fiscal mismanagement.

As of July, the country’s inflation stood at 8.15 percent year-on-year, its highest level in more than two decades, but according to Banxico, local economic activity is maintaining a gradual recovery, while the balance of risks is trending downward.

In June 2021, Banxico began a cycle of raising the key interest rate, as a result of price hikes.

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