Unexpected Mexican Interest Rate Cut

September 8, 2013

The Bank of Mexico’s benchmark interest rate was cut to 3.75% from 4.0%, a level that had prevailed for the prior half-year.  A 50-basis point cut on March 8 had been the first reduction since July 2009.  Officials are gambling that this easing will not expose the peso to excessive selling pressure.  A statement from monetary officials opines that inflation will settle back to the 3% 2-4% inflation midpoint because of the mounting slack in the economy.  GDP contracted nearly 3% at an annualized rate between the first and second quarters and was only 1.5% higher than a year earlier.  Mexico’s current account deficit equals roughly 1.5% of GDP

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



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