Mexico fights with volatile markets: peso on the upswing, but growth weak!
Mexico fights with volatile markets: peso on the upswing, but growth weak!
The geopolitical tensions and the associated uncertainties not only increase the financial markets, but also have a direct impact on the monetary policy decisions of the central banks. The former governor of the Bank of Mexico, Carstens, warned of the consequences of political inconsistency that could put a strain on economic growth. Companies hesitate to make investments, and households postpone large purchases. This development could have a negative impact on price stability, such as vienna.at reported.
interest reduction in Mexico
In the context of this tense situation, the Mexican central bank, known as Banxico, decided on Thursday to reduce the key interest rates by 25 basis points to 10.75 percent. This vote with 3 to 2 voices reflects the concern about the turbulence on the global financial markets, which strain the peso and strengthen weak economic growth. According to Investment Week , the decision has resulted in the peso increasing by 18.9 percent, which is the strongest weekly increase. Despite this positive movement, economic growth in Mexico remains weak, with only 1.8 percent for this year and 1.6 percent for 2025.The upcoming challenges for the future President Claudia Sheinbaum are considerable. It not only has to reduce the budget deficit, but also create a positive economic environment, while the uncertainties around the US elections and the political agenda in Mexico stop. The persistent volatility of the peso strengthens these problems and could inhibit future investments, since the government is also planning extensive constitutional changes. It remains to be seen how the various political and economic factors will influence the stability of the country.
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