- Henry Romero/Reuters
The Bank of Mexico just hiked rates by more than expected.
Banxico, as the bank is usually called, hiked rates by 50 basis points to 5.75%, up from the prior rate of 5.25%.
Economists had forecast that the bank would hike rates by 25 basis points, according to the Bloomberg consensus.
“This is more aggressive than most people were expecting,” Andrew Stanners, investment manager at Aberdeen Asset Management said after the report. “The central bank is waging an unofficial battle to try to support the currency.”
Previously, in its first meeting after Donald Trump’s election, Banxico hiked rates by 50 basis points to 5.25% – its highest rate since 2009 – up from 4.75%. This followed a tumultuous few weeks for the Mexican peso, which ended up being one of the big market casualties of the US presidential election.
“The brutal truth is that, at the moment, Mexico’s fortunes are defined more by what Mr. Trump might do in office than anything that the Central [bank] might do,” added Stanners. “We’ve become accustomed to the idea that central bankers are seen as masters of the universe. Mexico is a good example of how that balance of power is changing with politics now trumping central banks.”
The Mexican peso is up by 0.2% at 20.4172 per dollar as of 2:04 p.m. ET. Ahead of the rate decision, the peso was down by about 0.4% against the dollar.
- Markets Insider