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Mexico Vetoes Interest Rate Hikes

13 September, 2012

In Mexico’s most recent interest
rate review,Reuters reported that the country's top central banks have
unanimously agreed that inflation levels remain favorable,calling for no real
need to increase borrowing costs. 
In a review prior to this,policymakers also unanimously agreed to
maintain a steady target rate of 4.5 percent for interbank lending,which is
great news for borrowers.

It was generally agreed that
interest rates could remain low for the foreseeable future,since there were
only a few on the committee who felt that the central bank must add a
preemptive warning stating that if necessary,the central bank would raise its
rates.  But in a recent policy
review,the entire board of members conceded on this decision.

In order to buffer activity in
their economies,Peru,Brazil,Chile and Columbia have all increased their
interest rates a few times already this year.  Inflation did show signs of slowing in May,with prices
still showing that Mexico's economy is close to reaching its peak
performance.  This was generally good
news for the central bank in terms of decreased inflation. 

The meeting minutes just released
by the banks in June stated,“All of the members of the board made note of the
favorable developments that inflation has been showing in Mexico.” 

In 2009 Mexico slashed its
interest rates when the global economy tapered off severely,marking that
year’s greatest interest rate reduction. 
To bolster new growth,Mexico's central bank has maintained a steady
target interest rate since July of 2009.

In a poll,Reuters ascertained
that analysts are projecting a 25 basis point increase for the beginning of
2012.  It was also determined that
investors were counting on increased rates for January,based upon yields in
Mexico’s interest rate future market.

In addition,JP Morgan economist Gabriel Casillas stated that,“It
reinforces the view that they aren’t going to do anything for a long time.”

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