Mexico’s central bank cuts rates for first time in 5 years

Mexico’s central bank cuts rates for first time in 5 years

Mexico’s central bank cut its benchmark interest rate for the first time in over five years, reducing the overnight rate from 8.25 per cent to 8 per cent.

The Bank of Mexico (Banxico) said the decision is due to the decline in general inflation in recent months and weak domestic growth, as well as the recent US Federal Reserve’s interest-rate cut.

This cut ends the rate hike cycle that was modified in December 2015. Since then, the rate had risen by 525 basis points from 3 per cent. The last time Banxico had lowered the rate was in June 2014, when it went from 3.5 to 3 per cent.

Inflation is currently within the objective range of the central bank’s 3 per cent target, and the Mexican economy, which advanced 0.1 per cent in the second quarter of the year, has experienced low growth.

The IMF recently trimmed its forecast for gross domestic product growth this year in Latin America’s largest economy to 0.9 per cent from a prior estimate of 1.6 per cent three months earlier, roughly in line with government and central bank consensus.

A number of central banks around the world — including the US, Brazil, India, New Zealand and Thailand — have cut interest rates in recent weeks, as concerns about a global economic slowdown continue to pile up.

The peso is currently 0.3 per cent stronger against the dollar at 19.6232 pesos. It was trading around 19.68 right before the decision came.

Source link