MEXICO CITY: Mexico’s annual inflation remained far above the central bank’s target ceiling in July, keeping pressure on board members to continue raising interest rates at tomorrow’s monetary policy decision.

       Consumer prices jumped 5.81% compared to a year earlier, slightly less than the 5.88% rise seen in June but more than economists’ median estimate for a 5.78% increase, the national statistics institute reported on Monday. Monthly inflation accelerated to 0.59%, compared to the 0.53% reading recorded in June.

       Mexico’s central bank, known as Banxico, hiked its key interest rate by a quarter point to 4.25% in its last meeting, in June. The decision split board members, some of whom called the inflationary pressures transitory.

       The majority was concerned about continuing supply-chain disruptions and the persistence of inflation. Banxico targets inflation at 3%, plus or minus one percentage point.

       “Core inflation keeps trending up and headline inflation remains well above Banxico’s target, so a hike this Thursday is highly likely. We expect a 25 basis point hike with upside risks,” said Carlos Capistran, head of Mexico and Canada economics at Bank of America.

       Since the hike, swaps markets have been pricing around 100 basis points in further tightening this year. Economists surveyed by Citibanamex expect 75 basis points of hikes.

       “Lower headline inflation in July is mainly due to base effects and provides little relief for Mexico. Supply shocks and recovering domestic demand should keep pressure on prices. High headline inflation and accelerating core prices risk contaminating inflation expectations.

       “The results support our expectation for the central bank maintain a cautious tone and increase interest rates again at Thursday’s (today’s) policy meeting,” said Felipe Hernandez, Latin America economist. — Bloomberg