Mexico Finances Could Handle Higher Rates, Finmin Official Says

• Mexico's public finances could handle higher interest rates, a senior finance ministry official said on Thursday as the country faces an uptick in price pressures that have taken inflation significantly above the central bank's target rate.
• "There's scope to support, were it to occur, increases in interest rates without pressuring public finances," said Ivan Cajeme Villarreal, head of economic planning at the ministry. Villarreal was speaking at a news conference on public finances in which Deputy Finance Minister Gabriel Yorio said the recent rise in inflation did not appear permanent.
• Inflation accelerated faster than expected in the first half of April to 6.05%, up from 3.15% in 2020, the highest level in more than three years. The central bank targets a rate of 3% and has a one-percentage point tolerance range above or below that, so the jump in inflation has encouraged speculation that the bank may have to raise interest rates above its current level of 4%.
• However, a rise in interest rates could slow the country’s pace of recovery as higher rates disincentivize borrowing for consumption or investment purposes.

(Source: Reuters & NCBCM Research)