Bank of Mexico to cut interest rate for stronger economy

Published: August 17, 2019 12:59:42 | Updated: August 20, 2019 13:38:02

File Photo (Collected)

Mexican President Andres Manuel Lopez Obrador on Friday endorsed a benchmark interest rate cut in a bid to stimulate the economy.

In his daily press conference, the president said cutting the interest rate represents an effort to boost domestic economy in a complex international environment, reports Xinhua.

He said, "This is important because growth is stimulated this way. Lowering the benchmark interest rate further encourages investment ... and it is more profitable for productive activity."

On Thursday, Banxico, the country's central bank, lowered the overnight interbank interest rate from 8.25 per cent to 8.0 per cent for the first time in five years, citing downside risks for the Mexican economy.

"If interest rates were lowered and there was no confidence in the Mexican economy, that could generate imbalances. But the interest rate was cut and nothing happened. In fact, even the Mexican peso went up," he said.

The president assured that the country has sufficient international reserves, a controlled inflation and a stable currency, which represent strengths in the face of external destabilisers such as the economic situations in Europe and Argentina.

The Mexican economy, the second largest in Latin America after Brazil, is experiencing a slowdown in line with the global pace.

In 2018, the Mexican economy grew 2.0 per cent. For this year, Banxico forecasts a lower growth between 0.8 and 1.8 per cent.