March 6, 2020 / 12:19 AM / a month ago

Bank of Mexico expected to cut rates to 6.5% after Fed move: survey

FILE PHOTO: A general view of the Bank of Mexico building in downtown in Mexico City, Mexico February 28, 2019. REUTERS/Daniel Becerril

MEXICO CITY (Reuters) - Mexico’s central bank is seen cutting its key interest rate by 50 basis points at its monetary policy meeting in late March, 25 basis points more than a forecast two weeks ago following the U.S. Federal Reserve’s surprise rate cut, a Citibanamex survey showed on Thursday.

The Fed cut interest rates on Tuesday by a half percentage point to a target range of 1.00% to 1.25% in a bid to shield the world’s largest economy from the impact of the coronavirus, but the emergency move failed to comfort U.S. financial markets roiled by worries about a deeper, lasting slowdown.

“Considering the emergency cut to the Fed’s target rate ... the consensus of our Citibanamex Expectations Survey anticipates that Banxico will respond accordingly,” the survey said.

The Bank of Mexico, or Banxico as it is known locally, cut the key rate for a fifth straight meeting on Feb. 13, lowering it 25 basis points to 7.0%, amid a backdrop of a stagnating economy and slightly above-target headline inflation.

The survey, which was conducted by the Mexican subsidiary of U.S. bank Citigroup among 25 analysts, now forecasts the benchmark interest rate in Mexico will be at 6% at the end of 2020 and at 5.75% at the end of 2021, down from previous estimates of 6.38% and 6%, respectively.

Banxico will hold its next monetary policy meeting on March 26.

Reporting by Abraham González; Writing by Anthony Esposito; Editing by Christopher Cushing

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