Banxico Follows US Fed and Lifts Interest Rates FT.com
go to original December 17, 2015

Mexico has hiked its benchmark interest rate by a quarter-point to 3.25 per cent, becoming the first emerging market to follow in the footsteps of the US Federal Reserve in what is seen as an effort to protect the weak peso.

The widely anticipated move from the Bank of Mexico, known as Banxico, lifts the rate from a historic low of 3 per cent. It is Banxico’s first hike since mid-2008 when the bank hiked three times in three months.

In theory, a tame inflation outlook should allow Banxico to focus on boosting growth by cutting borrowing costs.

But in reality, because a US interest rate increase could prove disruptive, with investors likely to pull money out of Mexico if the gap between the two countries’ benchmark rates narrows, Banxico is seen to have little choice but to raise.

Read the rest at FT.com

Related: Mexico Monetary Policy: A Pre-Emptive Hike and Two More to Follow (EconoTimes)

Related: Mexico’s Carstens Says Next Fed Moves Likely to Lose ‘Mystical’ Quality (WSJ.com)

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