[Mexico City 26th Reuters]-The Central Bank of Mexico decided to lower the policy interest rate <MXCBIR = ECI> by 25 basis points (bp) to 7.75%. The rate cut is as expected. The company responded to the decline in inflation and the expansion of slack.
Two policy members insisted on a 50 bp rate cut.
In August, the central bank cut its policy interest rate from 8.25% to 8.00%, and has made monetary easing for about five years since June 2014. [nL4N25B3MN]
The central bank said in a statement that it has decided to lower the interest rate to 7.75% in light of the decline in inflation and the sluggish supply and demand in the economy, as well as the yield gap between domestic and foreign government bonds.
However, he said, “Economic activity has been stagnant in the past two quarters and July, but is likely to recover somewhat toward the end of the year,” he said, indicating that the Mexican economy may have escaped the worst.
Minister Marquez pointed out that access to credit is one of the key issues for the performance of domestic companies at a Bloomberg event in New York. He explained that funding costs are very high and interest rate cuts are important for economic recovery.
On that basis, he indicated that there was room for additional rate cuts, given the sluggish price and the recent rate cut by the Federal Reserve Board (FRB).
Goldman Sachs economist Alberto Ramos has changed his forecast for a 25 bp rate cut this year from one to two.
The gross domestic product (GDP) announced in July before the announcement of the central bank's policy interest rate contracted 0.1% from the previous month (seasonally adjusted). The first half of the Mexican economy barely avoided a recession.
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