Bank of Mexico

March 18, 2016

Mexico’s policy interest rate was left at 3.75%.  An unexpected 50-basis point increase in February has lent the peso a more stable tone.  A released statement from the Bank of Mexico says that future rate decisions will hinge on developments affecting actual inflation, expected inflation, Mexico’s output gap and Fed policy.  The FOMC’s decision not to raise the federal funds rate in March gave Mexican officials further cover against having to tighten their monetary policy so soon after February’s hike.  From 8.75% at end-2008, the Mexican central bank rate was cut 425 basis points in 2009, 100 bps in 2013, and 50 bps in October 2014.  The streak of declines was broken by a 25-basis point hike in December 2015 and the already mentioned 50-bp increase last month.  Like several other emerging market monetary policies, currency depreciation has forced Mexico’s to be tightened in spite of weak economic growth.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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