(Recasts with Trump, inflation, adds analyst quote)
By Gabriel Stargardter and Dave Graham
MEXICO CITY, Sept 29 Mexico's central bank
raised its benchmark rate 50 basis points to 4.75 percent on
Thursday, hoping to stem risks that a weak peso could fan
inflation after a sell-off in the currency sparked by fears
Donald Trump could win the White House.
The Banco de Mexico bumped up rates to their
highest level since 2009, when the Mexican economy was mired in
the global economic crisis. The hike was in line with the median
forecast of a Reuters poll of analysts this week.
"With this action, the aim is to stem inflationary pressures
and keep inflation expectations anchored," the bank said in a
statement, adding that the latest increase did not herald the
start of a monetary policy tightening cycle.
The rate rise followed a unanimous 50-basis-point hike in
June to keep the ailing peso from pushing up consumer prices.
Mexico's peso has hit a series of record lows in recent
months, and inflation rose faster than expected in early
September with the annual core reading just above the central
bank's 3 percent target for the first time since late 2014.
Concern over U.S. Republican presidential candidate Trump's
improved poll standings has exacerbated the peso's woes.
"If Trump wins, the peso is going to keep depreciating, and
they will have to raise rates higher still, and then what's the
limit?" said Barclays' Mexico economist Marco Oviedo. "Another
100 basis points, or another 150?"
The beleaguered currency, which has lost over 3 percent so
far this month, weakened to just under 20 pesos per dollar in
the lead-up to the U.S. presidential debate on Monday.
However, the currency surged after the face-off, in which
Democratic candidate Hillary Clinton was perceived to have
performed better than Trump, leading investors to trim bets on
steeper rate hikes in coming months.
Down nearly 13 percent this year, the peso,
weakened after the bank's announcement but later pared losses.
The bank said possible U.S. monetary policy tightening, the
price of oil and the U.S. election could raise risks of global
financial volatility. It also saw headline and core Mexican
inflation gradually increasing over the coming months.
The bank also said the balance of risks to inflation had
deteriorated in the short term, but it did not see evidence of
second-round effects on prices. The balance of risks to growth
had also worsened, the bank said.
(Additional reporting by Jean Luis Arce, Christine Murray,
Frank Jack Daniel and Miguel Angel Gutierrez; Editing by
Meredith Mazzilli and Alistair Bell)