By Anthony Esposito and Isabel Woodford
MEXICO CITY (Reuters) -The Bank of Mexico on Thursday increased its benchmark interest rate by a record 75 basis points to 7.75%, saying it would hike rates again and by as much if necessary to tame inflation that has surged to double its target.
Inflation in the year through mid-June hit 7.88%, data showed earlier in the day, well above the central bank's target of 3%, plus or minus one percentage point..
"For the next policy decisions, the board intends to continue raising the reference rate and will evaluate taking the same forceful measures if conditions so require," the bank said in a post-meeting statement after its ninth hike in a row.
All five board members voted unanimously for the rate increase, the largest hike under the Bank of Mexico's current regime, in place since 2008.
Banxico, as the bank is known, has been trying to moderate spiraling consumer prices. It has increased the benchmark rate by 375 basis points since mid-2021.
Thursday's move echoes the U.S. Federal Reserve's hike last week of three-quarters of a percentage point, its largest increase in more than 25 years. Policy makers in regional powerhouse Brazil raised rates to 13.25% and penciled in another hike for August.
Banxico underscored that in addition to inflationary shocks from the COVID-19 pandemic, there are pressures linked to Russia's war in Ukraine and strict lockdown measures imposed by China.
"The balance of risks for the trajectory of inflation within the forecast horizon is biased significantly to the upside," said Banxico.
In view of pressures on prices, Banxico revised up its forecasts for headline and core inflation. However, the bank still expects inflation to converge to its 3% target in the first quarter of 2024.
"Further tightening of the U.S. monetary policy, a prolonged duration of Russia's invasion of Ukraine and supply chain disruptions from China's lockdown measures will result in further rate hikes from Banxico in the near term," said Carlos Morales, director, Latin America Sovereigns at Fitch Ratings.
Morales projected Banxico would hike rates to 8.5% by the end of 2022.