Interest Rate Up
Mexico’s Central Bank (Banxico) Thursday announced the much expected interest rate hike which was 0.50 up from 4.75 to 5.25 percent.
The increase was according to a Banxico press release “due to an increase in worldwide financial volatility.”
With this hike, Banxico expects to meet several objectives such as stabilizing the short term peso-dollar currency exchange market and outlining a program to prevent inflation from going up from the 3 percent ceiling it has placed on it.
Thus, it expects that inflation for 2016 will close slightly above 3 percent and “forecasts” that this inflationary trend will prevail through 2017 as well, “depending on risks.”
Observers from different banks have predicted Banxico will go full-throttle with a 1 percent increase.
The half point hike may be revamped depending on the course the U.S. Fed takes next month when it convenes.
The announcement placed the dollar at an average of 20.4629 pesos per greenback.
The leaders of the Asia Pacific Economic Cooperation (APEC) are now meeting in Peru for their 24th Summit.
Mexico President Enrique Peña Nieto is attending this reunion which, though it had a thoroughly well planned agenda, the attention may shift into what the future holds both for the North American Free Trade Agreement (NAFTA) and the 12-nation Trans Pacific Partnership (TPP) treaty, which U.S. president-elect Donald Trump vehemently opposed during his electoral campaign.
In regards to NAFTA, Canada Prime Minister Justin Trudeau upon leaving Cuba, where he held a state visit, announced that he had plans to meet with President Peña Nieto “to coordinate our positioning” in terms of the threats against it made by Trump.
(Last year in the Philippines summit both Trudeau and Peña Nieto made a splash in the local Manila news as “the two most handsome presidents” of the APEC Summit. Will they repeat in Peru in their joint press conference?)
U.S. President Barack Obama will also be at the summit in the uncomfortable position of a sitting duck.
At a joint conference Wednesday, a group of business organizations announced that they will start a 100 day campaign in the United States to defend the strategic importance NAFTA has gained over its 22 years in existence for the three participating economies.
The leaders of the National Business Coordinating Council (CCE), the American Chamber of Commerce (AmCham), the Executive Council for Global Enterprises (CEEG), the Automobile Industry Mexican Association (AMIA) and the International Chamber of Commerce (ICC) made it clear that this is the moment to close the ranks and be united for the apparently inevitable NAFTA renegotiation.
The leaders repeatedly made a point to say that they see the renegotiating possibility as an opportunity to revamp NAFTA and turn Canadian, U.S. and Mexican companies into more competitive enterprises in a highly competitive globalized world.
AmCham president José María Zas warned that “Mexico is not the demon [affecting] the United States and there’s a need to promote the fact that NAFTA is working out. Thus, we’re highly optimist that through dialogue and understanding we can come up with a win-win relationship. We all have to stick together for Mexico.”
CCE president Juan Pablo Castañon emphasized that “this is not just about convincing him [Donald Trump], but about finding allies so that his own negotiators see the advantages and deepen into areas of opportunity that participants see to legitimately defend their interests as well as employment and investments of U.S. Americans and Mexicans.”
The campaign will focus on the leading 16 U.S. states whose gross domestic product depends in an important way on trade with Mexico.