The Bank of Mexico (BdM) is expected to announce further interest rate cuts today from 6% to 5.5%, the lowest rate since November 2016.
The BdM hopes to promote movement in financial markets and support domestic investment and consumption. Fiscally, the government has put, among other measures, $31 billion to support the healthcare system and $10.3 billion to boost commercial and development bank lending to businesses and individuals.
Mexico City is eager to reopen the economy. Among the first sectors to open will be autos—the backbone of the country’s manufacturing industry—likely on May 18. However, even this reopening is expected to be gradual given the 30% decrease in production requirements from the industry’s client base.
The government will likely continue to pursue monetary easing to lessen the burden of the economic crisis. Since inflation has been at its lowest in four years, the BdM has a path to cut rates further. As such, expect interest rates to drop to at least 4.75% by the end of 2020 to further stimulate borrowing, investment and consumption, especially in the manufacturing industry—autos in particular—as the government fights against crippling economic stagnation.
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Ana María is a research analyst on the Current Developments Team. She focuses her research on Latin American politics and economics and development.