Banco de México Leaves Rate Unchanged at 7% After Earthquakes

Banco de México, Mexico’s central bank left its benchmark borrowing rate unchanged at 7% as expected. The vote was unaminous with impacts from recent earthquakes and the inflation risks subsiding. 

mexico central bankBanco de México, Mexico’s central bank left its benchmark borrowing rate unchanged at 7% as expected. The vote was unaminous with impacts from recent earthquakes and the inflation risks subsiding. A Reuters poll of 21 analysts surveyed was also unnamoius in expecting unchanged. 

Highlights From  BdM Announcement

Growth

  • Balance of risks to growth have deteriorated particularly because of perception that adverse scenarios in the US – Mexico ties could materialize
  • Effects of quake on economy and inflation be temporary and moderate

Inflation

  • Balance of risks to inflation may have deteriorated
  • Past hikes have begun to have impact on inflation
  • Recent earthquakes could cause supply problems and price rises in some products, these would be temporary
  • In coming months general inflation seems to have reached its high point, without taking into account quakes 

Peso

  • Going ahead the board will be vigilant of currency changes and the output gap
  • Will also be vigilant of relative monopolistic stance with US as well as impact of quake on prices 

Source: Banco de México, Reuters

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