Bank of Mexico Raises Key Interest Rate More Than Expected After Brexit Vote Nacha Cattan and Eric Martin - Bloomberg
go to original July 2, 2016

Why Mexico Broke with Fed and Raised Rates After Brexit (Bloomberg)

Mexico raised its key interest rate after the peso plunged on the U.K.’s vote to leave the European Union, outweighing concerns revealed in the same central bank decision of a weaker domestic economy. The currency rallied.

Banco de Mexico increased the overnight rate a half-point to 4.25 percent Thursday, saying that while the nation’s growth outlook has deteriorated, worsened global economic conditions could impact prices. The median forecast of 26 economists surveyed by Bloomberg was for for a quarter-point increase. With nine analysts predicting no change and the rest divided between a quarter-point and half-point increase, forecasts deviated more than for any other decision since 2013.

It’s the second time this year that policy makers led by Governor Agustin Carstens have veered from the Federal Reserve’s path of keeping rates on hold, after a surprise rate hike in February, even after they said several times they preferred to match U.S. policy moves. The decision to raise rates more than expected Thursday highlights how far global decisions have overshadowed domestic factors, according to Credit Suisse Group AG.

"Today’s move was very bold," said Alonso Cervera, chief Latin America economist at Credit Suisse. "The central bank is acknowledging that the external environment is more complex, that it may drive the peso weaker and we have to respond to it. Growth considerations are very secondary."

Read the rest at Bloomberg

Related: Carstens Says Peso Has Room to Advance After Brexit Overreaction (Bloomberg)

We invite you to add your charity or supporting organizations' news stories and coming events to PVAngels so we can share them with the world. Do it now!