The Banxico cut its benchmark rate to 3.50% from 3.75% — it’s a record low.
A rate cut last month was a shocker but this one was widely expected (although a few economists were calling for a 50 bps cut or none at all). The central bank said cutting below this level wouldn’t be advisable, which takes further near-term cuts off the table. The comment led to a rebound in the Mexican peso.
Growth in Mexico has deeply disappointed this year with the government cutting its forecast to 1.7% from 3.5% at the start of the year. The economist consensus is even lower at 1.2%.
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The theme of emerging market weakness is one that hasn’t gotten much attention but with Caterpillar’s warning last week and no stories gripping the market, it could find the spotlight in the days ahead.
