Bank of Mexico Interest Rate Kept at Record Low of 3.0%

September 21, 2015

From a pre-Great Recession high of 8.25%, Mexico’s central bank interest rate was cut seven times by 375 basis points in all between January 2009 and July 2009.  Four more cuts of 50 basis points in March 2013, 25 bps in September 2013, 25 bps in October 2013 and 50 basis points in October 2014 sliced the rate to its current 3.0%, a record low.  Had the Fed tightened, the vulnerability of the battered peso likely would have forced officials to follow suit at today’s meeting.  However, they caught a break when the Fed kept its policy status quo, considering that CPI inflation is 0.4 percentage points below its 3% target and that measures of inflation expectations haven’t turned slightly higher despite the peso’s decline.  On-year GDP growth is barely above 2.0%, and so officials were happy to leave their monetary policy unchanged, too.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.