Losing That Fear of Floating

The Mexican peso has come under significant depreciation pressure over the past few months, and until recently Banxico would have been reluctant to risk adding fuel to the fire by cutting local interest rates. The authorities, however, have grown more comfortable with true exchange rate flexibility,...

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Bibliographic Details
Published inInstitutional Investor
Main Author Hood, Michael
Format Trade Publication Article
LanguageEnglish
Published New York Euromoney Institutional Investor PLC 01.09.2013
Subjects
Asset management
Central banks
Credibility
Currency
Economic conditions
Economic growth
Economic policy
Economic statistics
Emerging markets
External debt
Federal Reserve monetary policy
Flexibility
Foreign exchange rates
GDP
Gross Domestic Product
Inflation
Interest rates
Unemployment
Mexico
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Summary:The Mexican peso has come under significant depreciation pressure over the past few months, and until recently Banxico would have been reluctant to risk adding fuel to the fire by cutting local interest rates. The authorities, however, have grown more comfortable with true exchange rate flexibility, a development echoed elsewhere in the emerging markets. The cyclical argument for easing became more obvious with the publication of second-quarter GDP figures. Even compared with the US, Mexican growth has disappointed recently. After a more intense down-and-up move during the recession and its aftermath, Mexico outperformed the US through late 2011. Since then, Mexican growth has slowed, and its average pace over the past eight quarters has only matched that of the US.
ISSN:0020-3580