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Mexico’s central bank has cut interest rates 8 times since it started its current loosening cycle last year. It has now cut a total of 275 basis points.
That’s the second-fastest pace and largest cut of central banks in the world. But at 5.5%, Mexico still has one of the highest (inflation-adjusted) interest rates in the world.
However, it doesn’t seem to be enough to jumpstart the economy. And there are various expectations of further rate cuts in the near future.
The Banxico is in an especially difficult place. The Mexican economy already heading into a recession even before COVID reached the country.
It’s understandable that their focus is much more on the exchange rate and economic activity, and that they don’t care so much about inflation.
Without an improvement in underlying economic activity, we can expect this to be the theme not just for this meeting, but for the next several months
What We Are Expecting
There is a near-unanimous consensus that th...
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