LatAm: Banco de Mexico raises lending rate

The Central Bank of Mexico, Banco de Mexico, has again increased its base interest rate by 50 basis points to 6.25% after January saw inflation hit 4.72%, the highest rate in more than 4 years. Inflation was fuelled by a large increase in gasoline prices. It is the third time the Bank of Mexico has pushed up borrowing costs since Trump was elected President of the US. The central bank raised rates to anchor inflation expectations for 2018 and avoid a consumer price contagion following the jump in gasoline prices. Inflation is expected to run at above 4% before beginning to ease at the end of the year. The peso gained in response to the news, meaning the beleaguered Mexican currency is up by about 7% since the day before US President Donald Trump's inauguration.

The Mexican economy continues to face an uncertain future because of a weakened peso and poor trade discussions with Trump. This uncertainty is clear in RFi Group data, which shows that 46% of Mexican consumers are concerned about the Mexican economic outlook.

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