Mexico: central bank keeps rates unchanged as expected, mentions NAFTA concerns
- Banxico kept the main rate at 7.0% as expected.
- Central bank mentions NAFTA as a source of uncertainty.
- MXN remained steady, in consolidation after October’s rally.
As expected, the Bank of Mexico left the key interest rate unchanged at 7%. The last time it moved rates was a hike in June amid rising inflation. The CPI index peaked in August at 6.6% and Banxico officials estimate that it will continue to slowdown, reaching the 3% target toward the end of 2018.
The decision was unanimous. Some week ago, analysts were considering when the central bank could cut rates. The recent slide in the Mexican peso pushed those expectations far away. With inflation still high and all the uncertainty surrounding NAFTA negotiations rates are likely to continue at current levels.
It was the last meeting with Agustin Carstens as governor. He will leave on November 30 to head the Bank for International Settlements. The next meeting of the Governing Council will be December 14, one day after the decision of the FOMC. At that meeting, the Fed could rise rates according to analysts.
Mexican peso steady
The Mexican peso remained within the recent range against the US dollar. Earlier today USD/MXN rose to 19.15 and recently dropped to 19.03. The pair continues to move between 19.20 and 19.00, consolidating at significantly higher levels than where it was two months ago.
NAFTA uncertainty and a stronger dollar triggered a rally of the greenback in Mexico. USD/MXN recovered part of the ground it lose from January to September but it is still down 7.5% over the year.