MexECON Blog

Central Bank Holds Rates at 3.00 Percent

In a decision last Friday, policymakers at Banco de México held their benchmark interest rate at a record-low of 3.00%, precisely where it has been since the last cut in June.  In their statement, the policymakers said that the Mexican economy was continuing to grow at a moderate rate, as "a certain recuperation" in consumer demand was helping to offset softer exports and declining oil production.  They noted that inflation in Mexico was behaving well, as it remained around their medium-term goal of 3.0%.  However, they reiterated that they stood ready to act proactively if rising interest rates in the United States caused volatility in the exchange rate or threatened to boost inflation.

Comment:  With the Federal Reserve still likely to hike U.S. interest rates by late summer, the policymakers at Banco de México remain cautious.  Their next policy move is much more likely to be a rate hike than a rate cut.  Any rate hike could come ahead of the Federal Reserve's next move.  In fact, it could come sooner than most observers expect, with little or no warning.

Patrick Fearon, CFA
Portfolio Manager

Benchmark Rate 1505

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