Mexico: Central bank cut rates by 7.25% as expected, the decision not unanimous

• Banxico moves as expected, only one dissenter who voted for a 50bps cut. 
• Mexican peso remains steady, USD/MXN flat for the day at 18.95. 

The Bank of Mexico Governing Board decided to lower the target for the overnight interbank interest rate by 25 basis points to 7.25%. The central bank considered the low inflation environment and the slack seen in the economy. It warned that current conditions present risks to the macroeconomic outlook. According to them, the balance of risk in growth remains biased to the downside. 

The decision was not unanimous. One member voted for a 50bps rate cut (probably Heath or Esquivel). At the previous meeting, two of the five board members asked for a 50bps rate cut. 

“Banco de México’s Governing Board will maintain a prudent monetary policy stance and, under the current environment of uncertainty, will follow closely the potential pass-through of exchange rate fluctuations to prices, Mexico’s relative monetary policy stance in an external environment that it is still subject to risks, and the behavior of slack conditions and cost-related pressures in the economy. In the presence and possible persistence of factors that, by their nature, involve risks to both inflation and its expectations, monetary policy will be adjusted in a timely and firm manner to achieve an orderly and sustained convergence of inflation to its 3% target and to strengthen the anchoring of medium- and longterm inflation expectations so that they attain such target”, the central bank concluded. 

The Mexican peso held steady after the decision. USD/MXN is trading at 18.94, flat for the day and still near multi-month lows and the critical support of 18.90.