Bonds News

Mexican yields point to rate hike before year-end

MEXICO CITY, Oct 10 (Reuters) - Mexico’s central bank is expected to hike interest rates before the end of the year, Eikon Refinitiv data showed on Wednesday, amid concerns about persistently high inflation.

Yields on Mexican interest rate swaps pointed to a just over 50 percent chance of a 25 basis point hike at the central bank’s next meeting on Nov. 15 and forecast a near certain likelihood of a hike by its Dec. 20 decision .

Mexico’s central bank last week made a divided decision to hold its benchmark rate at 7.75 percent, with one member calling for a hike. The bank warned it may need to hike again.

Data this week showed Mexico’s annual inflation rate rose in September to 5.02 percent, well above the bank’s 3 percent target.

Rafael Camarena, an analyst at Santander in Mexico City, said another hike would be considered even more likely if the incoming government raises spending plans more than expected or the country sees significant wage hikes.

“I think there could be a hike,” said Camarena.

“From now until November, we have some inflation reports, but I think the more pressured decision could be in December, when we have the budget and a potential salary increases,” he said.

Leftist President-elect Andres Manuel Lopez Obrador takes office on Dec. 1 and will detail spending plans for next year.

He has promised to increase social spending on programs for the young and elderly without increasing debt, but some are skeptical austerity and anti-corruption measures will be enough to pay for his campaign promises.

A commission made up of government officials, executives and labor representatives is also expected to set next year’s minimum wage for next year in the coming weeks. (Reporting by Sheky Espejo; editing by Diane Craft)