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Mexico’s central bank kept its overnight rate at a record low as above-target inflation limits the room to stimulate a slowing economy.
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Mexican government bonds fell, pushing yields to their highest level in almost four months, as speculation that the Federal Reserve will curtail a stimulus program diminished the Latin American country’s prospects.
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Mexico’s economy grew less than analysts expected in the first quarter, fueling bets policy makers will cut interest rates again this year.
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Mexican short-term bonds rose, with yields approaching record lows, on mounting speculation that slowing growth will prompt the central bank to cut the target lending rate further this year from a record low 4 percent.
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Mexico’s central bank will probably keep borrowing costs at a record low after policy makers said they expect inflation to start slowing back to their target range following a brief surge.
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Barclays Plc says traders and banks led by Credit Suisse Group AG that are predicting interest-rate cuts in Mexico have misread the central bank’s intentions.
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Mexico’s short-term bond yields fell to record lows as speculation mounted that policy makers may reduce benchmark borrowing costs later this year as the peso posts the biggest rally among major currencies.
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Mexico’s central bank kept its benchmark interest rate unchanged for a tenth straight meeting as policy makers noted that domestic demand has been weak and the peso faced volatility stemming from Europe’s debt crisis.
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Mexico’s central bank will probably keep its benchmark interest rate unchanged for a ninth straight meeting as inflation stays under control and policy makers evaluate the fallout from the European debt crisis.
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Mexico’s consumer prices rose more than analysts forecast in the first half of February, reducing room for the central bank to cut rates as early as March.