MEXICO CITY (Reuters) – Mexico’s central bank said the economic recovery from the coronavirus pandemic is on shaky footing, even as Latin America’s second largest economy opens up for business, according to minutes of the last policy meeting.
Most members of the Bank of Mexico’s five-member board said that “although the reopening of certain economic sectors and regions in May and June will foster a slight recovery of economic activity, the impact has been considerable and uncertainty persists.”
In a unanimous decision by its board, the bank reduced the key interest rate by 50 basis points to 5.0% on June 25, the lowest level since September 2016.
Banxico, as the bank is known, said it will take the needed actions considering incoming information, the large impact on productive activity and the evolution of the financial shock so the policy rate is consistent with convergence inflation to its 3.0% target.
“Most members considered that monetary policy should continue to incorporate all available information and consider the persisting environment of uncertainty,” the minutes said.
Most of Banxico’s members agreed the balance of risks for growth remains significantly biased to the downside and the majority of members stressed the risk of a new coronavirus outbreak.
Mexico’s economy will likely contract by 10.5% this year, the International Monetary Fund said last month. The finance ministry and the central bank have said the recession will be the worst since the 1930s Great Depression.
Fiscally conservative President Andres Manuel Lopez Obrador has resisted pressure to borrow to fund an economic stimulus package.
“Most members stated that various countries have adopted important fiscal stimulus measures to mitigate the adverse effects on employment and on households’ and firms’ incomes,” according to the minutes.
(Reporting by Mexico City newsroom; Writing by Anthony Esposito; Editing by Chizu Nomiyama and Chris Reese)
