June 20, 2008 at 2:00 pm by Tom Lydon
Mexico is ready to throw down with inflation, which might turn its exchange traded fund (ETF) back around after negative one-month performance.
The country took two big steps to get control of the situation: first, they raised the benchmark short-term interest rate to 7.75%, from 7.5%. It’s the first increase since October, says Tom Petruno for the L.A. Times. Then, the country announced a deal with major food companies to freeze prices on more than 150 pantry staples through the end of the year.
The food-price freeze was supposed to forestall an interest rate hike, but Mexico apparently is extra-serious about fighting inflation. So far, the markets in Mexico like the moves, too: the peso is at five year highs against the dollar.
Will Mexico’s commitment to fighting inflation give the Federal Reserve a dash of inspiration? Right now, it’s between a rock and a hard place, because tighter credit could be a death sentence for the already-precarious situation of the financial companies.
The iShares MSCI Mexico (EWW) is up 3% year-to-date, but down 6.3% in the last month.
Tags | Emerging Markets, Federal Reserve, Latin America, Mexico
