Mexico central bank board united in move to follow Fed hike

MEXICO CITY: Mexico’s central bank board made a unanimous decision to hike borrowing costs earlier this month in a bid to stem further weakening in the peso currency after the Federal Reserve lifted US interest rates.

The Banco de Mexico board voted 5-0 to raise its benchmark interest rate by 25 basis points to 3.25 percent, according to December meeting’s minutes, released on Thursday. All members of the board thought that the move by the Fed to raise borrowing costs a day before the Dec. 17 Mexican announcement had important implications for Mexican monetary policy.

Most central bank members thought that if they had not moved there might have been a “disordered” depreciation in the peso that could have affected inflation expectations.

Mexico’s peso has slumped to successive record lows this year, hurt by expectations that higher US interest rates will sap demand for riskier assets, such as emerging market currencies and bonds.

However, there has been little impact on Mexican consumer prices from the peso slump and inflation has hit a record low this year.

Most central bank members thought that the economic outlook had improved and the majority also argued that balance of risks to inflation had improved in the short term.

Reuters

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