By Anthony Esposito and Dave Graham (NYSE:)

MEXICO CITY (Reuters) – The Bank of Mexico raised its benchmark interest rate by 25 basis points to 4.75% on Thursday, as expected, in a four-to-one vote by its governing board, as the central bank expressed concern about above-target inflation.

In a Reuters survey, 22 of the 22 respondents expected Banxico to increase the interest rate to 4.75% for the third consecutive time.

Banxico stated in its monetary policy statement that although the inflation shocks are temporary due to their magnitude and extended time frame, they could pose risks to price formation and inflation expectations.

Banxico declared that the key rate should be increased to mitigate these risks.

According to official data, the Mexican Consumer Prices rose by 0.42% in the first six months of September, bringing the annual inflation rate up to 5.87%. This is an increase that was already above August’s 5.59%.

This is much higher than Banxico’s target rate, which was 3% +/- 1 percentage point.

Banxico stated that core and headline inflation projections for the year are likely to decline, especially over the next one-year, and will converge at 3% by the end the forecast horizon.

“Banxico raised in accordance with our expectations. This was accompanied by an additional upward revision to the inflation forecasts of 2022’s first-half. Charles Seville from Fitch Ratings, Americas sovereigns chief said the main thrust of the statement is still on the temporary nature of price pressures. This suggests that Banxico sees no need for monetary tightening.

However, the forecasts Banxico made for fourth-quarter headline inflation increased to 6.2% from 5.7%, while core inflation projections rose to 5.3% from an earlier view of 5.0%.