The Day at a Glance | February 12 2021

The Top

· Banxico cuts interest rate to 4% in a unanimous decision; the expectation of seeing more cuts this year is maintained.

· The United Kingdom`s economy contracted (-) 10% in 2020, a record figure.

Economic environment

The Central Bank of Mexico unanimously decided to cut the interest rate in 25 base points and take it to 4%. Even though inflation rebounded more than expected in January, and that the bank considered that underlying prices remain within their convergence course towards the target, the bank`s members considered there was enough room to adjust its monetary policy. Banxico still expects underlying inflation to reach its 3% target in the third quarter of 2021. The decision put an end to the slight pause in the cycle of cutting rates; and the twelfth reduction in interest rates since August of 2019 was confirmed. The fact that the decision was made unanimously suggests that there the Governing Board has taken more of an accommodative stance than expected, along with a weak economic recovery that maintains expectations of seeing more cuts before the end of 2021. Estimates forecast that the interest rate could set at between 3.75% and 3.5%.

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