Mexico central bank hikes rates, cites increased uncertainty

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MEXICO CITY, Dec 20 (Reuters) – Mexico’s central bank hiked its benchmark interest rate by 25 basis points on Thursday, as expected, warning of uncertainty caused in part by the new leftist government’s economic policies, as well as the risk of higher inflation.

In a unanimous decision, the Bank of Mexico’s board voted to raise the overnight interbank rate by 25 basis points to 8.25 percent, its highest level since August 2008.

A Reuters poll of analysts had forecast the bank would hike the rate by a quarter of a percentage point.

Before taking office this month, President Andres Manuel Lopez Obrador rattled financial markets when on Oct. 29 he decided to scrap a partly built $13 billion new Mexico City airport on the basis of a referendum that was widely questioned.

“The Mexican peso exchange rate continued to reflect the uncertainty regarding the policies of the new administration,” the central bank said in a statement.

Market sentiment was also hammered by a bill drafted by Lopez Obrador’s National Regeneration Movement (MORENA) to limit bank fees and another to regulate the mining sector.

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Ed Moya

With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏

Ed Moya

Ed Moya

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