Mexico central bank raises key interest rate to 7.5 percent

IndustriesAssociated Press

Mexico's central bank has decided to raise its key interbank interest rate from 7.25 percent to 7.5 percent, citing expectations of a U.S. rate increase in March and continued volatility in exchange rates for the Mexican peso.

The Bank of Mexico said Thursday that inflation in 2017 ran at 6.77 percent, but dropped a bit to 5.55 percent on an annual basis in January.

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The bank said it expects inflation will continue to decline throughout 2018, and reach the target of 3 percent by the first quarter of 2019.

The peso dropped almost 1 percent in value against the U.S. dollar Thursday, closing at 18.86 to $1 before the announcement was made.