Mexico Central Bank Changes Rate Decision Dates Based on Fed

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Mexico’s central bank changed the dates of its interest-rate decisions for the rest of the year to improve its ability to react to an expected increase in U.S. borrowing costs.

Interest-rate swaps rose as traders saw the move as a signal Mexico will raise borrowing costs right after the Federal Reserve.

Banco de Mexico moved its decisions to one day after the Fed for July, October and December, and to within a week of the Fed in September, according to a statement Wednesday. The new dates will allow policy makers to have the most current information about Fed decisions when they decide Mexico policy, the bank said in its statement.

Mexico’s central bank will probably keep borrowing costs unchanged until the fourth quarter, when they’ll raise them for the first time since 2008 after the Fed increases rates, according to the median forecast of economists surveyed by Bloomberg.

‘Clear Signaling’

“The signaling is very clear to me: the central bank of Mexico will really react to what the Fed does,” Benito Berber, an analyst at Nomura Holdings Inc., said in a telephone interview from New York. “This decision solidifies that view. If the Fed goes, Banxico goes.”

One-year rate swaps extended their increase after the announcement, rising 0.07 percentage point to 3.76 percent at 2:29 p.m. in Mexico City, signaling higher odds of a rate increase. Six-month swaps also climbed. The peso maintained its loss, falling 0.3 percent to 15.7878 per dollar.

Mexico’s policy makers have said they’re concerned a smaller rate advantage versus the U.S. could prompt investors to pull money out of Latin America’s second-largest economy. The difference between the two nations’ target rates is 2.75 percentage points, the least since Mexico adopted a new benchmark in 2008.

Mexico’s rate decisions will be announced on July 30, Sept. 21, Oct. 29 and Dec. 17, compared with the previous plan for decisions on July 23, Sept. 3, Oct. 15 and Dec. 3.

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