MEXICO CITY, MEXICO / ACCESSWIRE / October 2, 2017 / Ever since concerns rose that Donald Trump may withdraw from the free trade agreement between Mexico and the United States, the peso dropped to record lows. In an attempt to curb the depreciating peso and control inflation, numerous hikes were made to Mexico's benchmark interest rates with annual inflation reaching seven percent - the highest it's been since December 2008. Now with the peso back on the rise, forex expert Pablo Soria de Lachica discusses how the country may be ending its cycle of hikes and lower borrowing costs as early as this December.
Mexico's central bank and monetary authority, Banco de Mexico, expected the peso to plunge when Donald Trump was sworn in as the President of the United States due to his many threats of building a wall and taxing Mexican imports and remittances. Their contingency plan included taking measures to shore up the currency, selling dollars to international investors, and, of course, hiking interest rates. The bank's mandate was to control inflation with a target range of 3%, and though it's more than doubled currently, there have been signs of them stabilizing and then lowering costs in the near future.
Mexico Finance Minister Jose Antonio Meade stated that "Mexico is probably near the end of its cycle of interest-rate hikes and may be able to lower borrowing costs as early as year end. The central bank is likely to raise borrowing costs a couple more times before it starts unwinding that position as inflation slows to less than 4% by the end of the year or early 2018." Meade went on to clarify how current inflation was due not only to the plunge in currency, but also the surge in gasoline prices - both of which has since stabilized. Additionally, monetary policymakers released a statement that rates have peaked and "reached a level steady with the process of efficient convergence of inflation to the 3% target."
Though it seems that Mexico's rate cut is inevitable, Pablo Soria de Lachica identified that there are key factors that could jeopardize it. Significant currency weakening, being a major aspect, derives mostly from U.S. policy uncertainty; these include if NAFTA (North American Free Trade Agreement) trade negotiations were to take a turn for the worse or if the Fed were to tighten monetary conditions and disturb flows to emerging markets. Another obstacle is Mexican politics as things may be left up in the air with Bank of Mexico Governor Agustin Carstens finding himself in his final months before heading to lead the Bank for International Settlements in Switzerland and with Finance Minister Jose Antonio Meade possibly becoming the governing party's candidate in next year's presidential elections.
Internationally acclaimed broker and forex expert Pablo Soria de Lachica oversees multiple transactions across the world. His unique perspective and expertise ranges from international trading and developing online trading tools for investors, to conducting market analysis and tailoring specific investment plans for his clients. Not only did the Universidad Tecnologico de Mexico graduate teach himself how to be an expert in foreign exchange transactions, he also passes his knowledge onto his clients through many of his instructional texts, webinars, blog posts, and newsletter. Soria de Lachica is currently collaborating with Kartoshka, a global leader at the forefront of technology in sales, telemarketing, and customer support.
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SOURCE: Pablo Soria de Lachica