MEXICO CITY, June 21 (Xinhua) -- Mexico's central bank Banxico announced Thursday it has increased the key interest rate by 0.25 percent to 7.75 percent.
The rise from 7.5 to 7.75 percent is the second increase in 2018 and places the interest rate at its highest level in over nine years.
"The risk has grown that inflation might present a lower rate of convergence toward its objective than previously thought," said Banxico in a statement, "Not modifying the monetary posture could delay achieving the objective of 3 percent (of inflation)."
According to Banxico, risk factors for inflation have materialized, including further depreciation of the exchange rate and more pressures on the prices of gasoline and liquid gas.
Furthermore, the recent U.S. tariffs on Mexican exports of steel and aluminum will have a limited, short-term impact on inflation, the bank added.
Besides this, the peso continues to feel pressure by the rise of interest rates in the U.S. as well as from continued uncertainty over the renegotiation of the North American Free Trade Agreement (NAFTA).
The statement said that the central bank would continue to adjust its monetary policy if the inflation objective continues to prove difficult to reach.
The interest rate rise had been broadly expected by the market after the U.S. Federal Reserve increased its short-term interest rates by a quarter of a percentage point, to between 1.75 and 2 percent on June 13.
