In a surprise move, Mexico’s central bank slashed the country’s key rate to a record low, supporting the anemic economy and bolstering the country-specific exchange traded fund.

The iShares MSCI Mexico Capped ETF (NYSEArca: EWW) was up more than 3% on Monday to follow up on Friday’s rally. EWW is down 11.8% year-to-date. [Some Bright Spots in Emerging Market ETFs]

The Bank of Mexico cut its key rate by 0.25% to 3.75%, Bloomberg reports.

“The rate cut is anchoring expectations for Mexican yields and provides a ceiling even if U.S. yields rise further,” Bernd Berg, an emerging-markets strategist at Credit Suisse Group AG, said in the Bloomberg article. “The focus of the central bank might have shifted to support growth.”

The central bank stated that economic risks have escalated and the economic expansion could be revised lower from their prior 3.2% to 4.2% forecast. Inflation levels dropped to 3.47% in July, its slow pace since 2009.

On the fiscal policy side, JPMorgan Chase warns that Mexico could propose new taxes on foods and softdrinks, reports Brendan Case for Bloomberg.

iShares MSCI Mexico Capped ETF

For more information on Mexico, visit our Mexico Category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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