Bank of Mexico Keeps Policy Rate at 7.5%

April 12, 2018

Mexican monetary isĀ  focused on on strengthening the anchoring of medium- and long-term inflation expectations and achieving the convergence of actual inflation on the 3.0% target. In response to the steep depreciation of the peso as candidate and then U.S. President Trump espoused an anti-Mexican agenda both in regard immigration and trade policy. The peso’s slide yanked Mexican inflation upward, the Mexican monetary officials began raising their policy interest from a base of 3.0% prior to December 2015 all the way to 7.5%. The last three hikes — all by 25 basis points — were implemented in June 2017, December 2017 and February 2018.

The peso, which continued to appreciate since the early February increase, and CPI inflation which declined from 6.8% last December to 5.0% in March, have reacted well to the restrictive monetary policy, and economic growth remains positive. Economic trends since the previous monetary review have conformed to the expectations of Bank of Mexico officials according to a statement released today, so by unanimous vote they elected to keep their key interest rate at 7.5%. Mexico still faces geopolitical risk, so the possibility exists that a further interest rate hike may be engineered in the future.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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