Fed move increases bets on Mexico interest rate cut
MEXICO CITY, Sept 18
MEXICO CITY, Sept 18 (Reuters) - The U.S. Federal Reserve's decision to keep its stimulus unchanged on Wednesday, due to concerns about the health of the U.S. economy, deepened bets that Mexico will further cut interest rates to spur growth.
Yields on Mexican interest rate swaps fell as investors added to bets that Mexico's central bank could lower borrowing costs in the coming months.
Interest rate swaps suggested nearly even odds that the Bank of Mexico could cut rates by another 25 basis points to a new record low of 3.5 percent when it meets in late October.
The Fed said it would continue buying bonds at an $85 billion monthly pace for now and it expressed concerns that a sharp rise in borrowing costs in recent months could weigh on the economy of the United States, Mexico's top trading partner.
"If there is not a sufficient pace of economic growth in the United States to withdraw stimulus, then this tells you that growth will be weaker in Mexico," said Eduardo Avila, an analyst at brokerage Monex in Mexico City.
"The Fed's move today reinforces the idea of another cut in Mexico," he added.
Mexico's central bank unexpectedly lowered its benchmark rate to 3.75 percent on Sept. 6 after Latin America's No. 2 economy contracted for the first time in four years in the second quarter.
- French launch Central African Republic mission but deaths mount
- Flights delayed as air pollution hits record in Shanghai
- North Korea frees U.S. veteran Merrill Newman
- Colorado baker discriminated by denying gay couple wedding cake: judge
- Cuba drops veto at WTO meet, enabling global trade deal: sources