Mexico City (AFP) – Mexico’s central bank cut its benchmark interest rate Thursday for the first time since 2014, citing a global economic slowdown and trade tensions between the United States and the rest of the world.
The bank’s governors voted to cut the one-day interbank lending rate by a quarter-point, to eight percent, it said in a statement.
The move from the normally hawkish central bank comes after Latin America’s second-largest economy flirted dangerously with recession, shrinking 0.2 percent in the first quarter of the year and growing just 0.1 percent in the second.
“In a context of marked uncertainty, the balance of risks to (Mexico’s) growth remains negative,” the bank said.
It cited numerous factors exerting drag on the economy, including “a slowdown in the main advanced and emerging economies,” “tensions between the United States and other economies in matters of trade, migration, technology and exchange-rate policy,” and a “disorderly exit by Britain from the European Union.”
With Mexico’s inflation rate at 3.78 percent — within the bank’s target range of three percent plus or minus one percentage point — the bank decided there was room to cut interest rates and give the economy a boost.
All but one of the bank’s five board members voted in favor of the cut, it said.
The move will come as good news to leftist President Andres Manuel Lopez Obrador, who took office in December and is struggling to kick-start the sluggish economy.
Lopez Obrador has vowed to deliver average economic growth of four percent per year during his six-year term. He announced a $25 billion economic stimulus package last month.
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