Mexico Central Bank Holds Rate Unchanged After June Cut

(RTTNews) - Mexico's central bank left its key interest rate unchanged on Friday, after a surprise reduction in June.

The Governing Board of the Bank of Mexico decided to keep the benchmark interest rate at a record low 3 percent. The decision was in line with economists' expectations.

In June, the rate was reduced by 50 basis points in a surprise move. Minutes of the June meeting later revealed that the rate cut decision was a divided one and policymakers were not in favor of more easing.

Citing preliminary estimates on economic activity, the bank said growth likely improved in the second quarter from the previous two quarters, mainly due to faster increase in exports.

The bank pointed out that there were no clear signs of recovery in domestic spending.

Previously, the central bank reduced the growth target for this year to 2.3 percent from 3.3 percent. Governor Agustin Carstens has said that the bank may be forced to lower the projection further.

Inflation accelerated to a three-month high of 3.75 percent in June, above the bank's target of 3 percent. Core inflation rose to 3.09 percent.

On Friday, the bank said it expects inflation to reach levels close to 3 percent and core inflation to move below that level from the start of 2015. Risks to inflation outlook remains favorable, the bank added.

Data released earlier on Friday showed that Mexico's industrial production grew in May, after a decline in the previous month, as manufacturing recovered.