Mexico rates set for long pause, say analysts
Interest rates set to remain steady in Mexico, economists forecast
Rates in Mexico are likely to stay at their historic low of 3%
for some time, analysts said after Banxico left the benchmark
unchanged last week.
||Augustín Carstens, Governor of the Bank of
Source: Banco de México
The decision to hold followed a surprise 50bp cut in June. The next move could
be a rate hike next year, analysts said.
"The bar for additional cuts remains very high,"
said Goldman Sachs analysts after the decision. The investment
bank expects GDP growth to pick up, leading to a potential rate
hike — but not sooner than late in the first half of
Capital Economics analysts forecast the rate to sit
at 3% for at least a year. The firm also expects economic
activity to pick up. Given "large amounts of spare capacity" in
the economy, an acceleration of growth would not push inflation
higher, the firm said.
Mexico’s inflation rose to 3.7% last
month, and growth has averaged 1.6% on an annualized basis in
the first four months of 2014, said Capital Economics.
The hold follows a decision by Peru’s
central bank to cut rates for the first time since November,
departing from a policy of holding rates while lowering
banks’ cash reserve requirement. The bank cut the
base rate to 3.75% from 4% on Thursday, noting continued weaker
than expected growth.
The cut was consistent with forecast inflation
converging to the target range and towards 2% in 2015, BCRP
said. But it cautioned that the move did not necessarily
indicate the start of an easing cycle.
Chile’s central bank is next in the
region to decide on interest rates, at its policy meeting on
July 15. LF