Mexico's Central Bank Discusses 'Decoupling' with the Fed

The Board of Directors of the Mexican Central Bank discussed how closely they would monitor the Fed in raising interest rates amidst slowing economic growth and a 20-year high in inflation. According to the minutes of the bank’s meeting, one of the five Board members argued that the Fed should be monitored in raising interest rates in order to maintain the interest rate differential between the two countries. One member stated that monetary policy should focus more on the local economy and that a “decoupling” from the Fed was possible in the near future. The bank raised its policy rate by 75 basis points to 8.5 percent this month in an effort to curb the rise in inflation. Annual inflation in the country had reached a 22-year high of 8.8 percent in August. Following the interest rate decision, Central Bank Deputy Governor Jonathan Heath told Bloomberg News that the bank’s monetary policy would be determined in parallel with U.S. monetary policy until December. The country’s economic growth fell short of expectations at 2 percent in the second quarter.