The Mexican peso jumped today to the highest level since October as the nation’s central bank refrained from cutting interest rates as high consumer prices hurt country’s economic growth.
The Bank of Mexico left its benchmark overnight interbank funding rate at the record low 4.50 percent as inflation exceeded expectations for three consecutive months. Inflation accelerated to 3.82 percent in the fourth quarter from 3.14 percent in the third quarter after the peso declined, being the worst performer among major currencies of Latin America, and a drought pushed up food prices. The high inflation rate harmed economic growth. The Mexican economy grew 3.68 percent in October, while it expanded 4.52 percent in September. The central bank predicted that economic growth will be 3.5 percent this year, down from 4 percent in 2011.
Some analysts think that the Mexican central bank will keep lending rates stable for a prolonged time to support growth of the economy. Yet the rally of peso amid improving prospects for the global economy may change outlook for Mexico’s economy, prompting Mexico’s bank to change its policy and perhaps to raise rates.
USD/MXN dropped from 13.2110 to 13.1640 as of 18:14 GMT today after rising to 13.2800 earlier. Today’s maximum was 13.1570 — the lowest rate since October 31.
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