By Anthony Esposito

(Reuters) – The Bank of Mexico has increased its interest rates to show its commitment to bringing inflation under control. Inflation is at its highest point in 20 years, Alejandro Diaz de Leon, the outgoing Governor, stated Tuesday.

Banxico is the name of the bank. The bank increased its efforts to curb inflation by raising its benchmark interest rates 50 basis points to 5.5% on December 16. This was in line with market expectations.

This was the fifth straight meeting at which Banxico raised rates.

Diaz de Leon stated that January marks the beginning of many economic prices. He told Reuters that he believes it appropriate to signal his commitment to return as soon as possible the target of 3 percent.

Banxico targets inflation at 3% with a 1 percentage point tolerance. Inflation in Mexico rose faster than anticipated to 7.37% in November, which is the highest since 2001.

Diaz de Leon explained that the baseline scenario for the bank is for inflation not to decline during the majority of 2022 but for prices to drop towards the end of the 2023 or the beginning 2023.

He argued that many of the inflationary surprises which have fuelled rising Mexican prices are from overseas.

Diaz de Leon stated that a less restrictive Banxico monetary policy can still “contribute towards the orderly behaviour of financial markets, especially the foreign currency market and the interest rate market.”

This helps to avoid inflation expectations being contaminated.

Victoria Rodriguez, a newcomer to the team, will take over for Diaz de Leon at the beginning of next year.