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Mexican central bank makes third straight rate cut

[MEXICO CITY] Mexico's central bank cut its benchmark interest rate for the third straight time on Thursday, seeking to kick-start growth, though the quarter-point cut was less than some analysts had forecast.

The Bank of Mexico lowered the one-day interbank lending rate to 7.5 per cent, it said in a statement, its third consecutive quarter-point cut.

The rare easing cycle from the normally hawkish central bank comes after Mexico's economy - the second-largest in Latin America, after Brazil's - slowed to a near-halt.

The Mexican economy shrank 0.2 per cent in the first quarter, stagnated in the second and grew just 0.1 per cent in the third.

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The bank cited a slowdown in the global economy and internal risk factors in Mexico for its decision.

"The risk profile for global economic activity continues to be slanted downward," it said.

In Mexico, "uncertainty remains around the bilateral relationship with the United States, and on the credit rating outlook for both (state oil company) Pemex and the country."

The bank also cited the US Federal Reserve's decision to cut its own benchmark interest rate by 0.25 percentage points last month.

Two of Bank of Mexico's five board members voted for an even larger cut of half a percentage point, which would have further spurred borrowing and given the economy an additional boost.

Mexico's annual inflation rate came in at 3.02 per cent for October - near the center of the bank's target range of three percent plus or minus one percentage point.

But sluggish economic growth has emerged as a major challenge for leftist President Andres Manuel Lopez Obrador, who took office in December 2018 and had promised GDP growth of two per cent this year.

AFP