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Banxico leaves the policy rate unchanged at 4.25%

The central bank of Mexico (Banxico) announced Thursday that it left its benchmark interest rate unchanged at 4.25%. In its statement, Banxico said that a board member voted in favor of a 25 basis point rate cut.

Market reaction

With the initial market reaction, the USD / MXN pair erased a large chunk of daily gains and was last seen trading at 20.5645, up 0.5% on the day.

Key takeaways from press release summarized by Reuters

“The balance of risks for inflation is uncertain.”

“The challenges for monetary policy due to the pandemic include a significant impact on economic activity, the financial shock and its effects on inflation.”

“Since the last policy decision, the peso has shown volatility and appreciated.”

“Wide slack conditions are expected throughout the time that monetary policy operates.”

“The risks to inflation, economic activity and financial markets pose great challenges for monetary policy and for the economy in general.”

“The recent behavior of headline and core inflation and the factors that affect them implies a slight increase in the expected trajectories within the projection horizon.”

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Credits: Forex Street

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