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Mexico central bank cuts interest rate again, flagging weaker growth

Kitco News

MEXICO CITY (Reuters) - Mexico’s central bank cut its benchmark interest rate for a fifth straight meeting on Thursday, lowering it 25 basis points to 7.0% as expected by the market, in the context of a stagnating economy and slightly above-target headline inflation.

“Based on the most recent data, gross domestic product in 2020 is forecast to grow less than estimated in the bank’s July-September 2019 quarterly report, with a balance of risks biased to the downside,” the bank said.

Mexico’s economy contracted last year for the first time in a decade, as businesses curbed investment due to concern over the economic management of President Andres Manuel Lopez Obrador. Meanwhile, annual inflation rose 3.24% in the year through January, slightly above the bank’s target of 3.0%.

In a Reuters poll, 23 of 24 analysts forecast the quarter of a percentage point cut - which brought the overnight lending rate to its lowest point in more than two years.

Headline inflation, the inflation outlook, greater economic slack, and the recent behavior of external and domestic yield curves were taken into account in the decision by all five of Banxico’s board members to lower the rate, the bank said in its post-meeting statement.

Reporting by Anthony Esposito; Editing by Frank Jack Daniel

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