(Adds more details from minutes, link to interview with central bank chief)
MEXICO CITY, Oct 18 (Reuters) - Hawkish Mexican central bank board member Manuel Ramos-Francia voted for a 25 basis point rate hike at the Oct. 4 monetary policy meeting due to the “high degree of persistence” of core inflation, minutes of that meeting showed on Thursday.
The other four members of the Bank of Mexico’s board voted to keep the benchmark interest rate steady at 7.75 percent, a 9-1/2 year high, though the board cautioned it may need to raise rates again due to the threat of persistently high inflation.
As part of a new communications strategy aimed at being more transparent, the central bank minutes recently started detailing how board members voted. The minutes also explained why Ramos-Francia placed a dissenting vote.
“Core inflation currently shows a high degree of persistence. Such persistence, together with perspectives for non-core inflation, makes it unlikely for the current forecast for headline inflation to be attained,” the minutes said, explaining the reasoning behind his vote.
The Bank of Mexico has already indicated that inflation could fall more slowly than previously expected on the back of higher-than-expected increases in prices for energy-related products, such as gasoline and gas.
Mexico’s central bank chief Alejandro Diaz de Leon said in a Wednesday interview with Reuters that he is concerned that energy prices could rise in coming months, making it harder to bring inflation down toward the 3 percent target.
Private analysts forecast headline inflation ending 2018 at 4.5 percent and 2019 at 3.7 percent, well above the bank’s 3 percent target.
The minutes showed that all five board members thought the balance of risks to inflation had an upward bias, while most of them felt the balance of risks to growth had a downward bias.
A new trilateral trade deal with the United States and Canada, aimed at replacing the North American Free Trade Agreement, helped the balance of risks to growth decrease at the margin, the minutes said.
Diaz De Leon said the new trade deal had lifted a shroud of uncertainty that weighed on Mexico’s economy, and could help boost activity and have a positive impact on future investments.
Mexico’s peso weakened more than 1 percent against the U.S. dollar on Thursday morning. (Reporting by Anthony Esposito and Michael O’Boyle Editing by Christine Murray and Phil Berlowitz)