Mexico central bank cuts key rate amid weak growth

Mexico's central bank slashed its main interest rate on Friday, the third cut this year to counter weakening growth in Latin America's second biggest economy. The bank reduced its interbanking rate from 3.75 percent to 3.50 percent, following a reduction in September and another in March which had marked the first cut since 2009. But the central bank said in a statement that it did not expect more cuts "in the foreseeable future." The Mexican government has drastically reduced its growth forecast for 2013, from 3.5 percent to 1.7 percent, following a disappointing economic performance in the first half of the year. The economy shrank by 0.74 percent in the second quarter compared to the first three months of the year, posting the first quarterly contraction since the 2009 global financial crisis. The central bank said the economy "started to show a budding recovery" in the third quarter but "the risks for lower economic activity in Mexico, while lower than before, remain high." The slowing economy in Mexico, which had posted 3.9 percent growth in 2012, comes in the context of weakening global growth and moderate economic expansion in the neighboring United States, the bank said. Economic consultant Jonathan Heath said the rate reduction was expected by the markets to give the Mexican economy a shot in the arm. "The only new thing was that the bank was very explicit in saying that there won't be any more cuts," said Heath, economics professor at Panamericana University. President Enrique Pena Nieto has presented a series of reforms to overhaul the tax system and the energy sector, saying the changes were necessary to breathe new life into the economy.