Mexico’s central bank decided on Thursday to lower its interest rate by half a percentage point to 4.5%, amid a marked economic decline and rising inflation caused by the coronavirus pandemic.
The Bank of Mexico indicated that inflation increased to 3.62% in July. At that level, 28-day government bonds now yield less than 1% in real terms, the lowest in years for such Mexican bonds.
The bank stressed that although inflation is above the government’s 3% target, it should return to levels close to the goal in one or two years.
Economic activity in Mexico plummeted 18.9% in the second quarter of the year, compared to the same period last year.