Banks' current portfolio of consumer credit in Mexico grew by 2.84% year over year in second quarter 2018, slowing from the 4.25% pace in the previous year, raising concerns of a further deceleration in lending amid rising interest rates in the country, El Financiero reported, citing data from Banco de México, or Banxico.
The credit card loan totals grew 2.41% in the quarter, reportedly the slowest growth since the second quarter of 2010.
"Credit for consumption has begun to be affected by increases in the reference rate by Banco de México, which indicates that this downward trend could continue," Felix Boni, HR ratings analyst, reportedly told El Financiero.
These trends come as inflation is trending above the central bank's target of 4.0%, putting pressure on Banxico to increase the benchmark rate, which is now at 7.75% after a cycle of rate hikes that started in December 2015. According to Bloomberg data, the likelihood of the central bank will hike its rate Oct. 4 went to 78.4% in the derivatives market, up from 72.6%, El Financiero reported.
In July, the national consumer price index in Mexico grew 0.54% monthly, representing the annual inflation of 4.81%, according to the country's National Institute of Statistics and Geography.
In a report, HR Ratings said the rise in inflation was expected, due to the "strong increase" in energy prices. The rating agency expects 2018 inflation to end at 4.60%, up from 6.40% in 2017.
Banxico on Aug. 2 kept its policy rate at 7.75%, but made note of rising noncore inflation as a result of increases in energy-related products' prices, primarily those of gasoline and liquefied petroleum gas. However, the central bank said core inflation continued on a downward trajectory and expected it to continue declining in the foreseeable future.