MEXICO CITY: Mexico’s central bank raised its key interest rate for the second time in a month on Thursday in response to the US Federal Reserve’s own rate hike.
The Bank of Mexico (Banxico) said in a statement that it hiked the rate by half a percentage point to 5.75 percent to “counter additional inflationary pressures” and strengthen monetary policy.
Banxico said it took into account the Fed’s decision on Wednesday to raise the key federal funds rate by a quarter percentage point to a range of 0.5 to 0.75 percent—the first hike since December 2015 and only the second in a decade.
The peso fell following the US Fed’s decision.
The economies of Mexico and the United States are closely intertwined, so any move by the US Fed or the government can influence policy decisions south of the border.
The Mexican central bank had already raised its rate by half a point to 5.25 percent on November 17 after the peso was rocked by Donald Trump’s victory in the US presidential election.
The Mexican currency has fallen due to the Republican president-elect’s promise to renegotiate the North American Free Trade Agreement (NAFTA) and threat to crub remittances sent by migrants in order to finance a giant border wall.