Mexico’s Central Bank Kept Their Rates Steady After a Surge

The central bank of Mexico is presumed to keep their interest rates strong following a strong climb of the currency amid cooled inflation pressures and a weakened economy.

Since the national election in the previous month, the central bank is likely to keep their benchmark rates more than a nine-year high at 7.75 percent, as surveyed around 15 analysts by Reuters.

The Mexican currency rose by 12 percent since the middle of June, prior to the sweeping victory of leftist Andres Manuel Lopez Obrador as president on July 1, supported by positive comments from his team.

Gains in the peso are significant in curbing the upward risks in the outlook for inflation, that makes holding rates as more feasible than the upcoming decision of the central bank, as stated by an analyst at Nomura.

According to analysts, figures for this week slightly declined in the second quarter of the Mexican economy. Thus, interest rates are anticipated to move steadily amid pressure on inflation is low due as it is demand-inducing.

In June, the borrowing rate of the central bank was increased after the U.S. Federal Reserve after a plunged of peso that raises concerns on inflation, which takes longer to cool down and reach the 3 percent target.

Nonetheless, some analysts at Banorte anticipate the central bank to have an open policy which could further increase their rates when the peso depreciates again.

At the beginning of the year, the peso was affected by a broad rally of the dollar with concerns of the renegotiation talk on the NAFTA trade deal between Mexico, the United States, and Canada. Talk between the U.S. and Mexico were continued in the previous week that boosted the peso yet uncertainty on negotiation and induces volatility of the currency.

The monetary policy of the central bank will publish their rates at 1800 GMT.