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Mexico Raises Key Rate for First Time Since 2008 After Fed

  • Banxico raises one day after Fed; cites danger of inaction
  • Financial stability concern tops slow inflation and growth
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Mexico raised borrowing costs for the first time since 2008 following Wednesday’s increase by the Federal Reserve, saying that failing to react to the U.S. move could lead to a disorderly selloff in the nation’s currency and spur faster inflation. The peso erased its loss.

Banco de Mexico’s board, led by Governor Agustin Carstens, boosted the overnight rate 0.25 percentage point to 3.25 percent Thursday from a record-low 3 percent, as forecast by 21 of the 26 economists surveyed by Bloomberg. Five expected no change. The Fed lifted borrowing costs for the first time in almost a decade, exiting record lax monetary policy that encouraged investors to pour money on higher-yielding developing nations.