Bank of Mexico’s Overnight Lending Rate Left at 4.5%

January 18, 2013

By central banking standards, Mexican monetary policy has been uncharacteristically steady for the past 3-1/2 years.  Over the first seven months of 2009, the Bank of Mexico’s reference interest rate was lowered by a total of 375 basis points from 8.25% to 4.50%, but the last of those cuts, a 25-bp reduction in July, was also the last time Mexican authorities changed policy.  The statement released today after this month’s meeting inserted a hint that policy might be eased in the future.  Officials note that inflation was below 4% at end-2012 as they had predicted earlier, confirming that a spike in the middle of the year would be temporary.  In-target inflation (2-4%) is anticipated this year, given the more moderate rate of economic growth in Mexico and elsewhere, and no shocks have occurred.  Consequently the “Governing Board has decided this time keep the target for the interbank interest rate a day in 4.5 percent.”  The statement adds that if present trends persist, officials may “want a reduction in the objective of the interbank interest rate a day to facilitate the adjustment of the economy to a situation of slower economic growth and lower inflation.”

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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