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MEXICO CITY, March 18 (Reuters) - Mexico’s central bank held borrowing costs steady on Friday, noting that measures taken by financial authorities had helped spur a peso rally.
The Banco de Mexico left its key rate at 3.75 percent, as expected by all 15 analysts surveyed by Reuters this week. In February, the central bank surprised markets with a rate hike aimed at supporting the battered Mexican currency.
The peso has gained about 9 percent since the central bank announced its half-percentage-point hike on Feb. 17 and intervened directly in the foreign exchange market for the first time since 2009.
The central bank said actions by financial authorities had “broken a negative trend in the price of the national currency, which had displayed an overreaction to an adverse external environment” early this year.
A global rally in riskier assets had also helped lift the peso against the U.S. dollar, the central bank said.
In a joint announcement with the central bank, Mexico’s finance ministry also said on Friday that it would cut spending this year after weak oil prices hobbled government income from sales of crude.
The peso has tumbled since late 2014 amid a slump in global oil prices, but so far its losses have not stoked big increases in inflation.
The central bank also said the country’s inflation would likely run “temporarily slightly above” its 3 percent target this year, but that it would cool to below that level by the end of the year.
Mexico’s annual inflation rate in February rose to 2.87 percent, its fastest pace since June, but the increase was driven by a surge in food costs. Core inflation showed only modest pressure from the weak peso.
Early this month, the central bank lowered its 2016 economic growth outlook to between 2.0 percent and 3.0 percent from a previous range of 2.5 percent to 3.5 percent. It blamed weak growth in the United States and around the world for crimping exports.
Policymakers said in their Friday statement that the economic outlook was still sluggish, while the balance of risks to inflation was neutral.
The central bank said it would monitor risks to inflation from currency weakness and watch for moves by the U.S. Federal Reserve.
The U.S. central bank held interest rates steady on Wednesday and indicated it expected two quarter-point hikes by the end of this year, half the number seen at its last policy meeting in December. (Reporting by Michael O‘Boyle; Editing by Chris Reese and Paul Simao)