(Bloomberg) -- Mexico’s inflation data is providing some “good news” and the central bank is still considering increasing its key interest rate by a “lesser magnitude” than last month’s 50 basis-point hike, the institution’s governor said in an interview.

Banxico, as Mexico’s central bank is known, will consider several factors including fresh inflation data before taking its next rate decision on March 30, Victoria Rodriguez Ceja told Bloomberg News in Merida, where she participated in the country’s annual banking convention. The bank doesn’t target a specific rate differential with the US Federal Reserve that could influence its decision, said Rodriguez, who is the first woman ever to lead the bank.

“The increase that we could make in the next decision, we consider that it could be of a lesser magnitude,” said Rodriguez, who had previously served as government budget chief. “We’ll take into account the decision of the Fed and many other factors, to the extent that they affect the inflation panorama.”

Banxico is expected to extend a tightening cycle that’s already added 700 basis points to borrowing costs since June 2021, even as other Latin American policymakers stay put. In their last decision, board members indicated that hikes were not over, in part because of the persistence of core inflation. Still, they did not say how much further above 11% the benchmark rate could go and since then the collapse of Silicon Valley Bank and its impact on other institutions have sent global markets into turmoil. 

Annual inflation in Latin America’s second-largest economy slowed more than expected last month, to 7.62%, the lowest in almost a year. While that’s still far above Banxico’s 3% target, it confirms a slowdown path from the peak of 8.7% reached in September.

Mexico’s policymakers are forging ahead with their rate hiking campaign as regional peers including Chile, Brazil and Peru hold their rates steady. In February, Banxico stunned financial markets with a bigger-than-expected 50 basis-point increase. The US Federal Reserve a week earlier had delivered a quarter-point boost, leading analysts to forecast that Mexico would match its northern neighbor for the seventh straight decision.

Rodriguez is one of the faces of the changing balance of power at the highest level of Mexico’s government. Though she was met with scrutiny around the start of her mandate in 2022, there are growing signs that the bank is getting the upper hand on the worst consumer-price surge in decades.

The central bank’s aggressive interest rate hikes have helped to boost the peso, which has posted the year’s biggest gains against the dollar among the 24 emerging-market currencies tracked by Bloomberg. It’s given back some of those gains amid the global banking turbulence, with a nearly 5% slide since Wednesday of last week.

The governor said the country’s flexible exchange rate “has helped, precisely, to absorb the shocks that we have been observing.” She said she did not see any need for authorities to intervene in markets, either to halt the peso’s recent slide, or to take any measures to counter its strength after last year’s sharp appreciation.

“The markets have been performing well and we observe liquidity and depth,” she said. “At this time we do not see any risk for our financial system.”

Finance Minister Rogelio Ramirez de la O said in an interview with El Financiero Bloomberg TV on Thursday that Mexico’s financial system has enough liquidity, and that local institutions are cautious enough to stay safe from global problems. He later said the crisis’s effects on the peso would be “short term.”

Economists expect annual inflation in Mexico to finish 2023 at 5.30%, according to a Citibanamex survey published this month. The analysts see interest rates at 11.5% at year-end and expect the economy to grow 1.4%.

Other Comments by Banxico’s Governor:

  • “We’ve already hiked 700 basis points. We don’t have an objective differential in relation to the Fed, though some analysts and other individuals thought that we did. We don’t. And I think it was very clear in our last decision.”
  • “The majority of the decisions that we’ve taken in this cycle, at least since I got here in 2022, have been unanimous, which shows the commitment the board has to its mandate.”
  • “We’ll have to decide as a board when the time comes what the magnitude will be. We’re still missing information.”

(Update with analysis of the pesos starting in eighth paragraph and quotes at end.)

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