(Bloomberg) -- Mexico's central bank confirmed its latest interest-rate hike hours after President Andres Manuel Lopez Obrador announced the half-point increase, an unprecedented disclosure that raised questions about Banxico's independence.
“Yesterday in Mexico, the central bank increased interest rates by 0.5 percentage point,” the president known as AMLO told reporters during his daily press conference early on Thursday. “We'll have an interest rate of 6.5%.”
Banxico confirmed its unanimous decision in a statement posted on its website at 3 p.m. ET, as previously scheduled. This was the second rate increase under the leadership of Governor Victoria Rodriguez, the president's former spending chief whom he tapped to lead the bank in November after changing his mind on an initial candidate.
The bank's move was based on the risk of inflation expectations rising further, as well as “the challenges posed by the ongoing tightening of global monetary and financial conditions, and the environment of significant uncertainty and greater inflationary pressures associated with the geopolitical conflict,” it said in the statement.
What Bloomberg Economics Says
“President Andres Manuel Lopez Obrador shared Banxico's decision at his daily morning press conference, hours before the official communique was released. The incident does not necessarily imply AMLO influenced the move, but raises questions about central bank independence -- particularly recently appointed Governor Victoria Rodriguez Ceja. Those kind of doubts can undermine Banxico's credibility and further complicate its mandate.”
-- Felipe Hernandez, Latin America economist
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Banxico declined to comment on AMLO's announcement. The president's press office didn't immediately reply to a request for comment.
“This was a very unfortunate comment by the president,” said Alonso Cervera, the chief economist for Latin America at Credit Suisse Group AG. The announcement “has some people questioning the degree of autonomy of the central bank.”
Peso Gains
The Mexican peso extended gains to a new intraday high after Banxico's announcement, eyeing the key 20-per-dollar level that was last seen in September. Swap rates held onto earlier declines, with the curve still pricing in 250 basis points in additional tightening this year.
AMLO's comments came after the central bank had brought forward two of its key meetings to decide on the rate yesterday in order to avoid them clashing with the annual banking convention in Acapulco, which also starts Thursday. This left more time than usual between the final rate decision and official announcement, possibly opening up the process to risks of leaks.
Credit Suisse's Cervera wrote on Twitter that the board should seriously consider minimizing the time between making a rate decision and announcing it.
Read More: Banxico Moves Key Policy Meetings to Avoid Banking Event Clash
AMLO's comment “comes unfortunately at a time when there are wider concerns about Banxico autonomy,” said Ernesto Revilla, a former chief economist in Mexico's Finance Ministry, now at Citigroup Inc. “What will happen if he is informed in advance of a decision that he doesn't agree with?”
After announcing the monetary policy decision, the president added that he “respects the autonomy of Banco de Mexico.” But that message is not what came across for economists.
“I can't believe what he said. I'm still in shock,” said Valeria Moy, director of the Mexican Institute for Competitiveness, or IMCO, an economics think tank based in Mexico City. “Banco de Mexico is a pillar in Mexico, and doing this is very shoddy. It also shows a lack of respect for the governor.”
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