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Mexico central bank cuts interest rate for 4th time

[MEXICO CITY] Mexico's central bank cut its benchmark interest rate on Thursday for the fourth straight time, seeking to kick-start Latin America's second-largest economy as it makes a tepid recovery from recession.

The Bank of Mexico lowered the one-day interbank lending rate a quarter point to 7.25 per cent, citing the "slackening" of the economy.

Mexico is coming off a recession that started in the last quarter of 2018. The economy - second in size only to Brazil's in Latin America - then stagnated in the third quarter of 2019.

The weak economy has emerged as one of the biggest headaches facing President Andres Manuel Lopez Obrador.

The leftist leader, who took office in December 2018, had promised economic growth of two percent this year, and an average of four percent across his six-year term.

But the central bank is predicting minimal growth, or even a small recession, for 2019. And economic analysts are forecasting only a modest recovery in 2020, with 1.1 per cent growth.

Despite the recent signing of the final version of the United States-Mexico-Canada trade agreement, which removed a major source of uncertainty for Mexico, the country's economic growth outlook "continues to be slanted downward," the central bank said.

The annual inflation rate was meanwhile at 2.97 per cent in November, just below the bank's target of three percent.

That gives the bank room to cut the interest rate further in a bid to heat up economic growth without having to worry about rampant price increases for now.

The central bank said one of its five board members had voted for an even larger cut of half a percentage point.

AFP