MEXICO CITY (Reuters – Mexico’s central banking board voted last week to raise its benchmark mortgage rate by 50 basis point to 5.50%. This decision was taken minutes after the recent monetary policy session.

“All members mentioned that headline and core inflation expectations for 2021, 2022 and for the next 12 months increased again, along with medium-term expectations, while long-term expectations have remained stable at levels above the target,” the Bank of Mexico said in the latest minutes https://www.banxico.org.mx/canales/%7B8F34053D-82F0-A7C5-1BDB-87807D8A6906%7D.pdf.

“Most members pointed that the targets for 2022 correspond to expectations already exceeding the upper limit,” stated Banxico.

Market expectations were outstripped by four members of Banxico’s Board who voted on December 16 for a 50-point rise and one for 25 points. Victoria Rodriguez (the new Governor) has assumed control of Banxico as of January.

Inflation in Mexico was at an average of 7.37% for November. This is more than twice the target rate set by the central bank. Banxico strives for an inflation rate of 3%. There is a one-percent tolerance between that and the target.

Mexico’s government announced last month that it has reached an agreement with business organizations to increase the minimum wage by 22% in order to reduce the nation’s wealth gap. Only a small fraction of U.S. wages are still available for the minimum wage.

Minutes stated, “most members noted the recent rise in the minimum wages could exert pressures upon labor costs,” adding factors that must be weighed by the bank.

Minutes also revealed that the forecasts of headline and core inflation had been revised upwards by all board members, particularly for 2022. However, a majority said they would decrease in a year.