Mexican financial authorities see market volatility on Fed normalization

FILE PHOTO: A general view shows buildings in Mexico City, Mexico, March 15, 2018 Picture taken through a glass window. REUTERS/Henry Romero

MEXICO CITY (Reuters) - Mexico’s financial stability board said on Thursday the U.S. Federal Reserve’s normalization of monetary policy could stoke greater volatility in financial markets and crimp financing in emerging market economies.

The board, which includes members of the finance ministry and the central bank, said it is “likely” Mexico’s economy and financial system will continue to face a complex scenario due to uncertainty on trade relations with United States and Mexico’s July 1 presidential election.

“A process of monetary policy normalization by the U.S. Federal Reserve that is not as gradual as anticipated could cause greater volatility in international financial markets and prompt more restrictive financing conditions in emerging economies,” the board said in a statement.

The Fed raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the U.S. central bank’s shift from policies used to battle the 2007-2009 financial crisis and recession.

Reporting by Anthony Esposito; Editing by Shri Navaratnam