| | |  Business News | March 2009 
Mexico's Central Bank Slashes Interest Rates
 Traci Carl - Associated Press
go to original
Mexico's central bank slashes interest rates by three-quarters of a point to boost economy.
Mexico City - Mexico's central bank surprised analysts Friday and slashed interest rates by three-quarters of a point.
The Bank of Mexico defended its decision, arguing in a statement that the worsening global economic crisis, especially in the industrialized world, "is significantly affecting financial markets, capital flows and the development of emerging economies."
Last month, the bank was conservative and lowered interest rates a quarter point, shaking investor confidence and sending the peso to record lows against the dollar. Friday's action brought interest rates to 6.75 percent.
Most analysts expected the bank to cut interest rates a quarter point Friday, while a few others, like Roberto Melzi, predicted as much as half a point.
Melzi, a Mexico strategist for Barclays Capital in Mexico City, welcomed the move.
"This is a sign, we think, that the bank is going to be much more aggressive in the future," he said. "It has been a very timid central bank."
While many in Mexico complain that interest rates are too high, the bank has shied away from deep cuts, mostly because the country is still struggling with relatively high inflation and a weak currency.
The peso strengthened slightly Friday to 14.1 to the dollar. The peso has lost more than 30 percent of its value against the dollar since August.
Friday's cut was the bank's third since 2006. It slashed its lending rate by 50 basis points to 7.75 percent on Jan. 16 in an effort to revive slowing growth.
Mexico, which sends 80 percent of its exports to the United States, has been hit hard by the U.S. downturn. The economy contracted 1.6 percent in the last quarter of 2008, and the bank has predicted another contraction for the first quarter, suggesting that Mexico would officially enter a recession, defined as two straight quarters of negative growth.
Speaking Friday to the Televisa network, central bank president Guillermo Ortiz said he believed the Mexican economy would hit bottom in the second half of 2009, then begin recovering in 2010.
Mexico’s Peso Advances After Bigger-Than-Forecast Rate Cut
Andrea Jaramillo - Bloomberg
go to original
Mexico’s peso rose, heading for a third week of gains, after the central bank lowered its overnight lending rate by more than analysts forecast in a bid to revive growth in Latin America’s second-biggest economy.
The peso advanced 0.7 percent to 14.1358 per U.S. dollar at 11:35 a.m. New York time, from 14.24 yesterday. It has jumped 2.7 percent this week, paring its loss so far this quarter to 3.3 percent.
“The peso had a knee-jerk reaction after the unexpected size of the cut,” said Mark Chandler, head of currency strategy at Brown Brothers Harriman in New York. “Last time they surprised with a lower-than-expected cut and this time it’s the other way around.”
Banco de Mexico cut its overnight lending rate to 6.75 percent from 7.5 percent. The reduction was bigger than that forecast by all 23 economists in a Bloomberg News survey.
The peso also advanced today as investors pared bets of dollar outflows after the Finance Ministry said yesterday that Citigroup Inc. isn’t breaking local rules that prohibit foreign government ownership of local banks.
The government had come under pressure from local lawmakers to force Citigroup to dispose of its Grupo Financiero Banamex SA unit after the U.S. Treasury agreed to take a 36 percent stake in the New York-based lender. The ruling removes a threat to its ownership in Banamex, Mexico’s second-biggest bank.
“That’s definitely one less thing to worry about,” said Alberto Bernal, head of emerging-markets macroeconomic strategy at Bulltick Capital Markets in Miami. “The bottom line is those outflows won’t materialize and that’s supportive for the peso.”
Finance Minister Agustin Carstens spoke to U.S. Treasury Secretary Timothy Geithner who told him the government will sell its stake in Citigroup in three years, according to an interview on the Televisa network.
Yields on Mexico’s 10 percent bond due December 2024 fell 24 basis points, or 0.24 percentage point, to 8.38 percent. The bond’s price rose 2.30 centavos to 114.08 centavos per peso, according to Banco Santander SA.
To contact the reporters on this story: Andrea Jaramillo in Bogota at ajaramillo1(at)bloomberg.net |
|
| |
Vallarta Weddings
Tell a Friend
Site Map
Print this Page
Email Us