- Mexico’s central bank held its benchmark interest rate at 7.75% on Thursday.
- Inflation has been slowing down, and a new NAFTA deal was just reached.
- Watch the Mexican peso trade in real time here.
Mexico’s central bank is held its benchmark interest rate steady Thursday in a policy announcement as inflation cools and after officials reached a breakthrough on NAFTA.
The move was in line with expectations. More than two-thirds of analysts polled by Reuters predicted the Bank of Mexico would keep its benchmark interest rate at 7.75%, the level it has been at since a quarter-percentage-point hike in June.
“Given the complex environment the Mexican economy faces, Banco de México’s Governing Board considers that the balance of risks for growth continues biased to the downside,” the central bank said in a statement. “This bias has decreased at the margin as a result of the recently approved trade agreement with the United States and Canada.”
The US and Canada reached a revised NAFTA deal with Mexico this week, easing trade tensions that have threatened growth. The United States-Mexico-Canada Agreement aims to modernise a trading system that has been in place for decades and that President Donald Trump had threatened to scrap.
Leaders including President-elect Andres Manuel Lopez Obrador and legislatures in the three countries still have to sign off on USMCA, which is expected to happen next year.
Inflation remains far above the central bank target of 3% but is expected to moderate in coming months. Consumer prices rose less than expected in early September at 4.88%, according to the national statistics agency, a welcome sign of slowdown after the index hit its highest level in a decade and a half in 2017.
“Banxico has given ample signals throughout the year that it considers the earlier tightening as sufficient to bring inflation back to target, and we do not think there will be any more rate hikes unless inflation proves stubborn,” Societe Generale wrote in a research note.
Mexico’s currency has lost about 1% against the dollar since last week, when the Federal Reserve increased its benchmark interest rate for a third time this year and signalled another hike in December. Following the Bank of Mexico announcement, the peso was down 0.5%.
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