MexECON Blog

Central Bank Holds Rates at 4.50 Percent

In a decision on Friday, policymakers at Banco de México decided to hold their benchmark interest rate unchanged at 4.50%.  In their statement, the policymakers noted economic activity in Mexico continues to trend upward.  While the rate of expansion has recently moderated, they said much of the moderation can be traced to temporary factors such as international supply disruptions in the auto industry after the massive earthquake in Japan.  The policymakers also noted core inflation continues to fall.  While some food prices have risen sharply, they still expected overall inflation to remain close to their goal of 3.0% for the time being.

Comment:  Mexico's benchmark interest rate has been unchanged at its current low level since July 2009, and the policymakers show no sign that they will change it in the near future.  In fact, their discussion of moderating economic growth and falling core inflation suggests they are still likely to hold rates steady for the foreseeable future.  Mexican monetary policy is likely to be stable for quite some time, though the next change will most likely be an increase in interest rates.

Patrick Fearon, CFA
Vice President, Fund Management

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