Banxico cuts benchmark interest rate to 4.5%

Due to a deep economic contraction during the second quarter of 2020 and just as expected by the market consensus, Mexico’s central bank (Banxico) cut the benchmark interest rate by half-point to 4.5%, its lowest level since 2016.

A member of Banxico’s board voted to reduce the rate to 4.75% from 5% at which it was since last June 25.

Banxico

said that the majority vote decided to cut the benchmark interest rate by 50 basis points to 4.5% to enter into force on August 14, 2020.

It said timely information shows that Mexico’s economic activity had a deep contraction between April and June 2020 due to the COVID-19 pandemic.

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There was a recovery from low activity levels in June as a response to the reopening of some sectors following an easing on mobility restrictions and a certain hike on external demand.

Nevertheless, Banxico warned there is still an uncertain environment. Hence, more similar measures are expected on the economic horizon with significant downward risks.

mp