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Banxico keeps rates as expected; MXN steady

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 4, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    The Bank of Mexico, as expected, left the target for the overnight interbank funding rate at 3.25%. At the previous meeting, it was increased from 3.00% to 3.25% following the hike by the Federal Reserve. In the statement the central bank repeated the message from the previous meeting but mentioned more risks ahead.

    It warned that it would monitor increasing risks to inflation from the depreciation of the peso and reiterated the importance of following Fed moves closely in order to avoid financial instability.

    Regarding the economic outlook, Banxico said that labor market slack continues, but is gradually diminishing. They see inflation moving toward the 3% target in 2016.

    In the statement the Board mentioned that it was fundamental to make the necessary adjustments in public finances including Pemex (Mexican state-owned oil company) in order to reduce the impact on income from the decline in crude oil prices.

    USD/MXN steady after decision

    The pair continued to rise modestly and hit a fresh daily high after the decision at 18.33. Earlier it bottomed at 18.01, the lowest level since January 15, but the rebounded and started to correct higher. Since the beginning of the year USD/MXN has risen more than 6%; the Mexican peso was among the worst performers in the currency market during January.
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