Weekly Report - 18 November 2021 (WR-21-46)

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MEXICO | Raising benchmark interest rate. On 11 November Mexico’s central bank (Banxico) raised its benchmark interest rate by 25 basis points to 5.00%, following increases of the same amount in September, August, and June. Banxico said in a report that the decision was taken in response to inflationary pressures after Mexico registered annual inflation of 6.24% in October, well above Banxico’s 3% +/-1 inflation target range for 2021. The report forecasts that inflation will close this year at 6.8%, up from the 6.2% forecast in its September report.

In a report released on 17 November, which affirmed Mexico’s long-term foreign-currency and local-currency issuer default ratings at BBB- with a stable rating outlook, international credit ratings agency Fitch said that the rise in inflation owed to rising manufactured goods prices coinciding with higher agricultural and energy prices. Fitch also said that it believes these effects are transitory, but higher prices are feeding into short-term inflation expectation. It added that it expected that “longer-than-expected supply shocks will constrain monetary policy space and will likely result in further rate hikes in 2022”.

MEXICO | IMSS claims recovery of formal jobs. On 12 November Mexico’s national social security institute (IMSS) released a new report which shows that as of 31 October it had registered a total of 20.77m jobs, exceeding the number observed before the start of the coronavirus (Covid-19) pandemic in March 2020. According to the same report, in October 172,688 new jobs were created in the formal sector, representing a monthly increase of 0.8%. According to the IMSS, this is the first time in the country’s history that over 170,000 new jobs have been created in two consecutive months.

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