Economy & Business - August 2020

Interest rate cut: On 25 June the governing committee of Mexico’s central bank (Banxico) announced its unanimous decision to cut the benchmark interest rate by 50 basis points to 5%, in a further effort to address the economic fallout of the coronavirus (Covid-19) pandemic. This marks Banxico’s fourth such interest rate cut since February. In statement, Banxico highlighted the fact that economic activity in Mexico registered a “significant contraction” in the first quarter of 2020 (down 1.4%), and that “available information indicates that the impact of the pandemic intensified in April”. It also notes that the balance of risks for inflation remains uncertain, with the general inflation rate increasing from 2.15% to 3.17% between April and the first half of June. According to the statement, “expectations for headline inflation for the medium and long-term have remained relatively stable, but at levels above the 3% target”.