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Mexico outlook gloomy, risks limit monetary policy scope-cenbank minutes

Credit: REUTERS/DANIEL BECERRIL

Mexico's economic outlook has suffered a rapid deterioration due to the coronavirus outbreak, but room for maneuver on monetary policy may not be as broad as perceived following the shock, minutes from the central bank's latest rate decision showed Friday.

Adds cenbank comments about Pemex

MEXICO CITY, April 3 (Reuters) - Mexico's economic outlook has suffered a rapid deterioration due to the coronavirus outbreak, but room for maneuver on monetary policy may not be as broad as perceived following the shock, minutes from the central bank's latest rate decision showed Friday.

On March 20, the central bank announced a 50 basis points interest rate cut in an out-of-cycle move, its biggest cut in six years, to bring the benchmark rate to 6.50%.

Mexico's economy has been hammered by disruption from the spread of the coronavirus and a sharp fall in oil prices that has added to the woes of the loss-making state oil firm Petroleos Mexicanos, known as Pemex. PEMX.UL

Banxico, as Mexico's central bank is known, said the majority of its board members "signaled that the financial situation of Pemex, which was already fragile, has become more complex due to the fall in oil prices."

Slumping oil prices and lower economic growth will make the country's financial accounts more vulnerable, said the bank, which has kept Mexico's interest rates much higher than in most of the developed world in the past couple of years.

Still, the bank said the majority of its board members felt that given higher risk premiums, Mexico's relative monetary policy position may not be as wide in scope as perceived.

One board member, Javier Guzman, voted to cut interest rates by only 25 basis points, while the rest backed the 50 point reduction in the benchmark rate in March, Banxico said.

(Reporting by Dave Graham; writing by Drazen Jorgic; Editing by David Gregorio)

((drazen.jorgic@tr.com; Reuters Messaging: drazen.jorgic.thomsonreuters.com@reuters.net))

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