Mexico central bank seen holding rates steady after peso gains

5/5/2016 Reuters 

pesoMexico’s central bank is expected to hold its key lending rate steady on Thursday after peso gains tamed concerns about higher inflation.

All 25 analysts surveyed said they expect the Banco de Mexico to keep the benchmark interest rate MXCBIR=ECI at 3.75 percent. The central bank is due to announce its decision at 1300 local time (3 p.m. ET) on Thursday.

Mexico’s peso has gained about 6 percent since the central bank unexpectedly raised rates by 50 basis points in February and directly intervened in the foreign exchange market for the first time since 2009 to try to halt a slide in the currency.

The peso’s comeback has eased concerns that currency weakness could hit inflation expectations, while weak U.S. data has sown doubts about how quickly the U.S. Federal Reserve could raise interest rates this year.

Mexico is expected to raise borrowing costs along with the Fed to prevent foreign investors from dumping local debt as U.S. interest rates rise.

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