Mexico’s central bank said Thursday it was lowering its benchmark interest rate by a quarter-point to 8%, citing slowing global economic activity and tensions including the trade war between the United States and China.
The drop from 8.25% was reportedly the first rate cut by the Bank of Mexico in five years.
In a statement, the bank said “the risks that the global economy faces have increased” and also mentioned commercial disputes, the “disorderly” Brexit process and deterioration of “some political and geopolitical risks.”
It added that uncertainty persists over the U.S.-Mexico relationship as well as downgrades to ratings of state oil company Pemex and sovereign debt.
The Dow Jones Industrial Average had its biggest single-day drop of the year on Wednesday amid mounting fears of a possible recession and weak economic data from Germany and China.
Earlier this week, analyst Alfredo Coutino of Moody’s Analytics forecast only ”mildly positive” GDP growth of 0.5% for Mexico this year.
“However, if investors remain reticent, the economy could report no growth or even a mild contraction in 2019,” Coutino wrote.
The Mexican peso closed up 0.33% vs. the U.S. dollar Thursday.
Report by Reuters
