(Updates with details from statement, background)
By Gabriel Stargardter and Michael O'Boyle
MEXICO CITY Dec 15 Mexico's central bank on
Thursday aggressively hiked its benchmark interest rate in a bid
to cool quickening inflation after the peso fell to record lows
in the wake of Donald Trump's Nov. 8 U.S. election victory.
The Banco de Mexico hiked its main interest rate
by 50 basis points to 5.75 percent, more than the
median forecast by a Reuters poll of economists, taking it to
its highest level since April 2009.
The central bank has raised rates five times this year,
lifting borrowing costs by a cumulative 250 basis points.
Policymakers on Thursday said the hikes would help push the
rising inflation trend back down by 2018.
The peso reversed losses on the announcement,
gaining around 0.25 percent to 20.42 pesos per dollar.
The move came a day after the U.S. Federal Reserve raised
interest rates by a quarter point and signaled a faster pace of
increases in 2017 as the Trump administration takes over with
promises to boost growth through tax cuts, spending and
The Mexican central bank's statement on Thursday was
permeated with references to the impact of Trump's victory,
which has upended expectations for Mexico's economy.
"The environment facing the national economy right now is
characterized by doubt related ... to the possibility that in
the United States they pass economic policies that hamper trade
and investment," the Mexican central bank said.
It added that the U.S. election result had increased the
risks of the United States adopting policies that could
negatively impact the bilateral relationship with Mexico.
It also said it believed the balance of risks to both growth
and inflation had deteriorated further, adding that inflation
would rise close to the upper end of the central bank's 4
percent limit by the end of 2017. In 2018, it said, inflation
would start to trend back toward its 3 percent target.
Last week, data showed Mexico's annual inflation in November
reached its highest level in two years.
But the central bank flagged one positive development,
noting the favorable results of this month's deep-water oil
tender demonstrated that the government's structural reforms,
particularly those in the energy sector, could generate good
The peso slid to a record low in the wake of Trump's
victory, posting its biggest two-day loss since a 1995
The U.S. Republican candidate had threatened during the
election campaign to unwind a free trade deal with Mexico and
block the money sent home by Mexican immigrants to pressure the
country to pay for a border wall.
"In the (bank's) statement, we're starting to see the
difference between Donald Trump the candidate and Donald Trump
the president-elect," said Alfonso Esparza, a currency
strategist at Oanda in Toronto. "There's less doubt, but still
the risk that his campaign promises become reality."
(Reporting by Gabriel Stargardter; Editing by Alistair Bell and