Banco de México unexpectedly cut its benchmark interest rate by 25 basis points, from 6.50% to 6.25%. The decision came amid rising inflation, pressure on the peso and signs that the U.S. Federal Reserve may keep monetary policy tight; Banxico’s rationale was that economic slack could limit inflationary effects from currency depreciation.
Lower rates could add pressure to the peso, raising the local-currency cost of imported feed and other commodities. The article frames that exchange-rate risk against the view that weak domestic demand will contain inflation.
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