Bank of Mexico raises rates for the first time since 2008

A vendor at a fruit stand made change for a shopper at the Central de Abasto market in Mexico City. Mexico’s central bank is trying to avoid further pressure on the peso. (Susana Gonzalez/Bloomberg)
A vendor at a fruit stand made change for a shopper at the Central de Abasto market in Mexico City. Mexico’s central bank is trying to avoid further pressure on the peso. (Susana Gonzalez/Bloomberg)

By Juan Montes / Wall Street Journal

The Bank of Mexico raised interest rates for the first time since 2008, despite record-low inflation and relatively slow economic growth, as the central bank seeks to avoid further pressure on the peso after a sharp depreciation this year.

The Bank of Mexico lifted the overnight interest rate target by a quarter percentage point to 3.25 percent, as widely expected, in a move that most analysts saw as inevitable after the U.S. Federal Reserve began tightening its monetary policy this week.

In unusually clear language, the central bank said the increase was mainly in response to the Fed’s move “which, in the absence of the adjustment in our own reference interest rate, could generate additional disorderly depreciation of the national currency and affect inflation expectations and inflation itself.”

http://www.wsj.com/articles/bank-of-mexico-raises-rates-for-first-time-since-2008-1450381223

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