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Key rate cut in Mexico stimulates economic growth: AMLO

Mexican President Andrés Manuel López Obrador said on Friday that the benchmark interest rate cut by the central bank stimulates economic growth and, although there is a "difficult" environment, the Mexican economy "is fine."

Andrés Manuel López Obrador, president of Mexico.

Andrés Manuel López Obrador, president of Mexico. / Reuters

Reuters | Miguel Ángel López y Diego Oré

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Leer en español: Recorte de tasa clave en México estimula crecimiento económico: AMLO

In his morning press conference, the president added that he respects the decision of the Bank of Mexico (Banxico) and that his government will continue to invest in Pemex after the monetary entity said that it is necessary to "address the deterioration" in the credit rating of the state oil company.

On Thursday, Banxico reduced the benchmark rate to 25% on Thursday, its first cut in five years, citing lower inflationary pressures but warning of the risks to the local economy arising from an environment of marked global uncertainty.

"The bank of Mexico, which is autonomous, decided the interest rate, this (...) stimulates growth," said López Obrador, known by his acronym AMLO. "By lowering interest rates there is more stimulus to invest, to rely on credit, it is more profitable for productive activity."

Also read: Peru’s Central Bank does not rule out new interest rate cut in September

The Mexican economy grew marginally in the second quarter of 2019, avoiding a dreaded technical recession but confirming the slowdown of the second largest economy in Latin America.

"There is a difficult environment," AMLO added, referring to fears about a global crisis. "Fortunately we are fine, we have enough reserves, we have no inflation problems, we have no depreciation of our currency ... the Mexican economy is fine."

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