Bank of Mexico Stuns Markets With a Surprise Rate Cut

Posted Friday, August 16, 2019 by
Arslan Butt • 1 min read

Mexico’s central bank cut its overnight interbank rate by 0.25% to 8.00% on Thursday, for the first time in over five years. A weak economy and slow pace of inflation have forced the Bank of Mexico to undertake these measures and possibly even consider more monetary policy easing steps in the future.

This move puts Mexico in the league of several other central banks around the world which have been turning dovish lately, resorting to either rate cuts or easing measures. Rising global trade tensions have been one of the major reasons driving central banks to support depressed economies.

Bank of Mexico’s rate cut came as a surprise for markets as most economists were expecting it to hold rates steady at 8.25%. Following this move, the Mexican peso lost about 0.4% of its value against the dollar, but managed to recover soon after. At the time of writing, USD/MXN is trading at 19.59.

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