Bank of Mexico Overnight Interest Rate Raised a Fifth Time Since December 2015

November 18, 2016

Yesterday’s increase, like the previous three undertaken in February, June and September of this year, was by 50 basis points and lifts Mexico’s key central bank rate to 5.25%, highest since the first half of 2009. There was an initial 25-bp increase last December. The rate had ended 2008 at 8.25% but was at 4.5% by July 2009 and eventually declined to 3.0% after a cut in October 2014.

A statement released by central bank officials observes an increase in financial market volatility. The peso has been under considerable downward pressure and during the U.S. election campaign came to represent the best market barometer of the likelihood that Donald Trump would be elected president. He wants to renegotiate Nafta, deport illegal Mexican immigrants who’ve committed a crime, build a wall along the U.S. southern boundary and limit the ability of¬†immigrants to remit earnings back to family still in Mexico.

The peso still lost ground after the announced interest rate hike.

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

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