Mexico’s interest rate hike may help the peso

The peso is down more than 15% in relation to the dollar this year, and hit a new low last week, dropping to 17.44 pesos to the dollar.

Interest rates on savings won’t change as much, Mahoney said. Risk-averse CD savers have been saddled with low rates on their money since the Great Recession, and, even though deposit rates tend to rise as loan rates go up, they lag.

Matthew Whittaker, chief economist at the Resolution Foundation, a nonpartisan think tank focused on living standards, said that the current combination of low inflation, low interest rates and gently rising wages, means that 2015 might prove a temporary “sweet spot” for household finances.

“To begin with, banks will swallow the interest-rate increase because profit margins continue to be very attractive”. “I don’t see this halting demand for business lending”. He added that 99% of private mortgages in Mexico are at fixed rates-a lesson from the financial crisis of 1994 when many Mexicans lost homes and cars after borrowing at variable rates.

Mr Carney acknowledged in a recent speech that sensitivity to rate increases “may be particularly relevant in our still heavily indebted postcrisis economy”. Yields on pension accounts managed by private funds tumbled to 3% in October, compared with 12% in late 2012 when the overnight interest rate was at 4.5%. Once again this places little pressure on the Bank of England to lift interest rates. Taiwan’s central bank cut its rates to one.six-two-five percent, … while Indonesia and the Philippines kept their rates steady.

The central bank, sometimes called Banxico, said in its statement Thursday that the growth outlook has improved amid strengthening investment and consumption, and that it sees inflation near the 3% target over the next two years.

Mortgages: Rates on new 30-year fixed mortgages have more to do with inflation and economic conditions than an uptick in short-term rates by the Fed, Gumbinger explains. Mexico’s economy expanded at a faster pace than any economist projected in the third quarter, fueled by a rebound in domestic consumption.

But critically, the weak peso hasn’t translated into higher consumer prices. It now looks likely that inflation will remain low for some time yet, though it is expected to climb slowly in the coming months.

McKenna, who in the early 2000s met with the Fed’s Board of Governors in Washington, D.C., three times a year as a member of its Thrift Institutions Advisory Council, is not as convinced as the Fed seems to be that inflation is looming.