Mexican One-Day Interbank to Remain at Cyclical Low

July 10, 2011

Rate cuts by Bank of Mexico policymakers between January and July 2009 totaled 375 basis points from a one-day interbank rate high of 8.25% to 4.5%.  On July 8, the 4.5% key interest rate was kept yet again.  The next meeting is scheduled for August 26.

Officials released a rather dovish statement, suggesting no near-term tightening.  Officials note that the pace of Mexican growth has slowed and observe that continuing considerable slack in the economy is suggested by a variety of labor and credit market indicators.  Capacity is not under strain, and the current account deficit has narrowed.  Core CPI inflation is below the 3% target, and and a slower projected rate of decline in the output gap buys time before interest rates will need to be raised.  Officials will meanwhile monitor expected inflation and commodity price trends.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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