Mex­ico CB hikes rates to over 7-year high as US elec­tion sinks peso

Kuwait Times - - BUSINESS -

MEX­ICO CITY: Mex­ico’s cen­tral bank hiked in­ter­est rates to their high­est in over 7 years on Thurs­day and warned that the elec­tion of Don­ald Trump as US pres­i­dent had cast doubt on the di­rec­tion of Latin Amer­ica’s sec­ond-largest econ­omy. The Banco de Mex­ico raised its key rate 50 ba­sis points (bps) to 5.25 per­cent, its high­est since May 2009.

The move had been ex­pected by the me­dian of 15 an­a­lysts polled by Reuters from the end of last week. But the mar­ket later tilted to­ward a hike of at least 75 bps and the peso closed down just over 1 per­cent.

“The mar­ket was ex­pect­ing a bit more,” said Al­fonso Es­parza, a strate­gist at Oanda in Toronto, who still thought the 50 bps hike was the right move due to the risk to growth from Trump’s threat to un­wind a free trade deal with Mex­ico.

“It is still very early to know what could be the ef­fect of the new poli­cies of Pres­i­dent-elect Trump,” he said. “The cen­tral bank could end up risk­ing too much be­fore it re­ally knows what will hap­pen with Trump’s prom­ises.” The cen­tral bank said the out­come of the US elec­tion could af­fect the re­la­tion­ship with Mex­ico, on top of fur­ther episodes of global volatil­ity.

“The cur­rent en­vi­ron­ment fac­ing the na­tional econ­omy is char­ac­ter­ized by greater un­cer­tainty,” it said, adding that “the new in­ter­na­tional en­vi­ron­ment” sug­gested that eco­nomic growth could be weaker go­ing for­ward. The peso slid to a record low last week as Trump swept to power, post­ing its big­gest two-day loss since a 1995 de­val­u­a­tion.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.