Bank of Mexico Surprises With Interest Rate Cut

By Dow Jones Business News, 
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By Anthony Harrup

MEXICO CITY--The Bank of Mexico unexpectedly cut its benchmark lending rate by half of a percentage point Friday to a record-low 3% to help jump-start an economy that has failed to recover so far this year.

The rate cut, the first since October, came as a surprise to the market which had seen the central bank staying on hold given the gradual reduction in the U.S. Federal Reserve's monetary stimulus, which will make emerging market assets less attractive as dollar yields rise.

The peso weakened following the decision, jumping from 12.8360 pesos to around 12.9260 pesos, before recovering to around 12.89 pesos. The local stock market extended gains, with its leading IPC index up 1.4%.

The Bank of Mexico, led by Gov. Agustín Carstens, said Friday it doesn't foresee any further rate cuts given the expected improvement in the Mexican economy and the U.S. tapering.

Write to Anthony Harrup at anthony.harrup@wsj.com


  (END) Dow Jones Newswires
  06-06-141058ET
  Copyright (c) 2014 Dow Jones & Company, Inc.


This article appears in: International , Economy


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