Mexico Cuts Again

Mexico’s central bank cut rates 25 basis points Friday, taking interest rates from 3.75% to 3.50%, largely in line with market expectations. However, it did surprise the markets with language suggesting the cut would be the last for a while. This month’s decision, which followed a 25bp cut that surprised the markets last month, takes into consideration factors including weakness in the global economy, the US Federal Reserve’s actions and slower-than-expected growth in emerging economies. “The forward guidance offered at today’s meeting is consistent with our view that, absent signs that the expected recovery is gaining no traction, the short easing cycle would end today with a 25bp cut, given the already low and simulative level of nominal and real rates,” says Goldman Sachs in a note following the decision. Itau says it doesn’t expect policy rates to change “at least until 2015.”