Mexico central bank hikes rates, cites increased uncertainty

MEXICO CITY, Dec 20 (Reuters) – Mexico’s central bank hiked its benchmark interest rate by 25 basis points on Thursday, as expected, warning of uncertainty caused in part by the new leftist government’s economic policies, as well as the risk of higher inflation.

In a unanimous decision, the Bank of Mexico’s board voted to raise the overnight interbank rate by 25 basis points to 8.25 percent, its highest level since August 2008.

A Reuters poll of analysts had forecast the bank would hike the rate by a quarter of a percentage point.

Before taking office this month, President Andres Manuel Lopez Obrador rattled financial markets when on Oct. 29 he decided to scrap a partly built $13 billion new Mexico City airport on the basis of a referendum that was widely questioned.

“The Mexican peso exchange rate continued to reflect the uncertainty regarding the policies of the new administration,” the central bank said in a statement.

Market sentiment was also hammered by a bill drafted by Lopez Obrador’s National Regeneration Movement (MORENA) to limit bank fees and another to regulate the mining sector.

 

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya