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Further Mexico rate reductions look likely

Friday, August 30, 2019


The move follows reports from the National Institute of Statistics on August 23 that GDP had grown by just 0.02% quarter-on-quarter in the second quarter (Q2) of 2019. With Q1 having shown a negative figure, Mexico narrowly avoided recession. The results confirm a sharp economic slowdown since the second half of 2018. On August 15, Banxico lowered its target interest rate by 25 basis points to 8.0%.


  • The monetary loosening should reduce the temptation of some legislators to alter Banxico’s mandate in the pursuit of economic growth.
  • Given the sharp economic slowdown, the monetary loosening will probably have only a marginal impact on credit.
  • With inflation falling, real interest rates are increasing, and should continue to act as a brake on economic activity.

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