Bank of Mexico Cuts Policy Rate for Third Time since February

April 22, 2020

The Bank of Mexico Governing Board held an unscheduled meeting, cutting its policy rate for the third time this year. Along with reductions of 25 basis points in February and 50 bps in March, today’s 50-basis point decline reduces the rate to 6.0%. Policymakers also put together $31 billion of additional support “to foster an orderly behavior of financial markets, strengthen the credit channels and provide liquidity for the sound development of the financial system.” In a released statement, officials project more than a 5% on-year drop in real GDP during the first half of 2020 and assert that the resulting negative output gap will more than offset inflation caused by peso depreciation, thus maintaining a disinflationary medium-term trend in prices. As a producer and exporter of oil, the sharp drop in its prices and those of other commodities will subject Mexico’s economy to further difficulty.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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