Bank of Mexico to release interest rate decision

Mexico’s central bank, the Bank of Mexico (BdeM) is set to release its interest rate decision today, with many analysts split on whether it will make further cuts or maintain the present 4.25% rate.

In their previous meeting, the Bank had signaled that the aggressive rate-cutting cycle that began in August of last year was nearing its end; inflation has risen well above the 3% target to 4.05%, leading some to suggest the BdeM will maintain the current rate.

The Mexican economy reported the biggest expansion in decades in this year’s third quarter, with GDP increasing 12% compared to last quarter, as the economy expanded to meet increased U.S demand for manufacturing. Nevertheless, the expansion could be temporary given rising COVID-19 cases in the U.S and new lockdowns in Europe, which are likely to dampen this short-term growth.

While the Bank has not signaled what it intends to do this month, it is likely to engage in one further rate cut of 25 basis points, regardless of the risk of inflation. At this point the bank will leave the interest rate unchanged for the rest of this year and, most likely, all of next year. 

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