(Bloomberg) -- Mexico’s central bank raised borrowing costs for the third consecutive meeting Thursday as policy makers’ efforts to slow above-target inflation failed to head off a jump in consumer prices.

Banco de Mexico, known as Banxico, increased its key interest rate by a quarter-point to 4.75%, in a split decision. All but one of 26 economists surveyed by Bloomberg predicted the 25 basis-point hike.

Consumer prices in Mexico and across Latin America have spiraled up above official targets as economies reopen to pent-up demand and snarled supply chains. At the same time, households have faced surging food and energy costs, prompting Mexico’s government to impose a cap on prices for cooking gas last month. Inflation did ease somewhat in August, but headed back up in early-September toward 6%, nearly twice the central bank’s 3% target.

“Inflation in Latin America, and specifically in Mexico, is a problem of inertia,” Joan Domene, a senior economist at Oxford Economics, said before the decision. “Once you see many prices going up, expectations keep rising.”

The central bank forecast earlier this year that inflation would rise as the economy’s rebound gained traction, and then slow again as pandemic-related disruptions proved temporary. In fact, it’s spent 15 months above target since closing out May 2020 at 2.84%.

Read More: Mexico’s Uneven U.S.-Powered Recovery Leaves Many Regions Behind

Third Hike

As consumer prices remained elevated and inflation expectations moved higher, Banxico in June unexpectedly raised borrowing costs for the first time since 2018 with a quarter-point hike and matched that increase in August. 

Banxico’s post-August decision communique and the minutes of that meeting suggested policy makers were in a data-dependent mode, but the mid-September reading reported last week showed annual inflation had jumped to 5.87% from the prior 5.60%. 

Perhaps more concerning to Banxico, core prices, which include less volatile items such as tradable goods, surpassed economists’ expectations in early September and accelerated to 4.92% in comparison with a year earlier. 

High core prices could create expectations that supply shocks are lasting. Economists in a survey by Citigroup Inc.’s local unit Banamex published last week raised their year-end inflation forecast to 6.1%, up from 5.6% in early July. 

The same survey puts the key rate at 5% by year-end whereas the median estimate of economists surveyed by Bloomberg is 5.25%. The central bank sees core inflation peaking at 5.1% in early 2022 before converging to target only by the second quarter of 2023.

“Rising expectations will probably keep core inflation above central bank estimates for the medium term, or at least until next year,” Oxford Economics’s Domene said.

While the bank now sees its inflation fight playing out over a longer time frame, it’s also now forecasting growth of 6.2% in 2021, which would be the fastest pace since the 1990s, after shrinking 8.2% in 2020, the most in almost a century.

Banxico Governor Alejandro Diaz de Leon will lead two more meetings of the board, in November and December, before ending his term at the end of the year. He is set to be replaced by former Finance Minister Arturo Herrera, an announcement that led to speculation about the board’s being more dovish in the future.

Read More: AMLO Is Sweeping Out Inflation Hawks in Overhaul of Central Bank

©2021 Bloomberg L.P.