UPDATE 3-Mexico cenbank raises rate aggressively to counter peso slump
(Adds economist comments)
By Michael O'Boyle and Gabriel Stargardter
MEXICO CITY, June 30 (Reuters) - Mexico's central bank raised its key interest rate more than expected on Thursday in a bid to support the peso and calm concerns that currency weakness could inflame inflation.
The Banco de Mexico raised its key rate by half a percentage point to 4.25 percent, above the 25 basis-point hike projected by the median of analysts surveyed by Reuters.
The peso has been buffeted by global volatility since May and is the second-worst-performing emerging market currency this year, behind the Argentine peso. It reversed losses to gain around 1 percent after Thursday's announcement.
Policymakers said they hiked rates to prevent deep peso losses from hitting inflation expectations after "external conditions deteriorated in a significant way."
"I wouldn't rule out that they could hike again, even before the Fed, if the exchange rate keeps trading very poorly," said Benito Berber, an analyst at Nomura in New York.
The U.S. Federal Reserve Bank set aside a possible rate hike earlier this month, and many analysts now expect the Fed will keep rates on hold until late this year, if not longer.
Sergio Luna, an economist at Banamex in Mexico City, noted that policymakers did not say the hike was a one-off increase as they did in February when they raised interest rates by 50 basis points in an unscheduled meeting after the peso tumbled. Continuación...