Mexico cuts its overnight rate to 3.00% from 3.50% in a surprise move. It’s the first rate move since September and brings the rate to the lowest since 2005, when the current structure was introduced.
The central bank says the cut was due to slack in the economy and that no further cuts are planned. They do not see inflation pressures from aggregate demand and note that inflation pressures have improved.
Any time a developing world central bank surprises with a rate cut you have to wonder about the strength of the global economy.
None of the 20 economists surveyed by Bloomberg forecast a cut, let alone a 50 bps move. Still, there has not been quite the surprise you’d expect to see in USD/MXN, the US dollar rose to 12.90 from 12.84, which is hardly a shocking move.
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