Banxico increases interest rate to 6.50%

By Elliot Bullman

The central bank said that despite the best performance recently observed in domestic and international financial markets, the Mexican economy continues to face a very complex environment.

The Board of Governors of the Bank of Mexico (Banxico) made its second adjustment of the year to monetary policy, in which it increased its benchmark rate by 25 basis points to 6.50%.

banxico increases interest

Banxico's announcement is in line with market estimates, which envisaged this increase. This level of interest rates had not been seen since April 2009, when the country faced a financial crisis brought on by the collapse of US junk bonds.

With regard to inflation, Banxico recalled that it has continued to rise, standing at 5.29% during the first half of March - mainly due to the impact of rising energy prices - and expects to maintain that trend during the year and yield to the end Of 2018, when it expects to reach 3%, within a range in which the bank feels more comfortable.

Banxico increases interest 3

The objective rate of Banxico sets the interest to be paid on short-term loans, i.e the cost of money provided by banks. This measure is one of the tools that the institution has to control inflation, the main mandate of the Mexican central bank.

As the rate rises, credits, consumption and physical investments are discouraged, but it drives savings, in addition, foreign capital sees our country more attractive to the payment of higher interest rates and this avoids further depreciation of the peso due to the flight of Capitals.

During 2016, the institution ruled by Agustín Carstens raised its interest rate five times in its attempt to control the exchange rate and avoid a transfer to its inflation target. The most recent move, and the first in 2017, was on February 9, when it raised its interest rate by 50 basis points to 6.25%.

banxico increases interest 2

RELATED NEWS

  • The final curtain call for the Ringling Bros. circusThe final curtain call for the Ringling Bros. circus
  • MD Elektronik Mexicana, a company with German capital, arrives in LeónMD Elektronik Mexicana, a company with German capital, arrives in León
  • Mexico’s Grupo Lala is lead bidder for Danone’s Stonyfield FarmMexico’s Grupo Lala is lead bidder for Danone’s Stonyfield Farm
  • IMF ratifies flexible credit line for $86 billion for MexicoIMF ratifies flexible credit line for $86 billion for Mexico
  • Nissan breaks sales record in MexicoNissan breaks sales record in Mexico
  • British Petroleum expects to grow its investment in Mexico´s energy sectorBritish Petroleum expects to grow its investment in Mexico´s energy sector
  • Shell and Exxonmobil to open gas stations this year in MexicoShell and Exxonmobil to open gas stations this year in Mexico
  • 29 countries to support China on the Silk Road29 countries to support China on the Silk Road
  • NissanNissan's 'Godzilla' arrives in Mexico
  • Hybrids are hot in MexicoHybrids are hot in Mexico
  • General Electric backs NAFTA and voices support for MexicoGeneral Electric backs NAFTA and voices support for Mexico
  • MexicoMexico's Secretary of Foreign Affairs keen to start NAFTA talks in U.S.
WATCH LIVE TV



Most Read Articles
Most Watched Videos
  • Generations Riviera Maya
  • Mayair