Banxico Hikes Interest Rate a Half-Point to 4.75% Juan Montes - Nasdaq
go to original September 30, 2016

Director of the Mexico's Central Bank Agustín Carstens at a recent informational session (Cuartoscuro/María José Martínez)

The Bank of Mexico raised interest rates by a half percentage point Thursday, making good the expectations of most economists, in a bid to contain inflation and bolster a peso hovering near record-low levels.

The central bank led by Agustín Carstens increased the overnight rate to 4.75%. But the bank sought to reassure investors that the half-percentage-point rate increase won't necessarily be repeated at the next meeting, saying that "it isn't the start of a tightening cycle."

It is the third time this year that the bank has increased borrowing costs, having made moves of the same size in June and February.

Annual inflation has been below the bank's 3% target for the past 15 months, but picked up in the first half of September to its highest level in seven months. The bank has a sole mandate to keep inflation under control.

The peso has been a concern for the central bank, as the 13% depreciation of the past year could end up triggering price increases and pushing inflation above target. A weak peso makes imports more expensive.

The peso gained ground after the rate increase and was quoted in Mexico City at around 19.4230 to the U.S. dollar, compared with 19.50 before the decision.

Read the rest at Nasdaq

Related: Wall Street Is Souring on Mexico's Stocks as Bull Market Flags (Bloomberg)

Related: Mexico's Carstens Says Trump Effect on Peso "a Reality" (Reuters)

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