Fed Makes First Rate Cut Since 2020: The Week in Finance

The Federal Reserve announced a 50 basis point reduction in its key interest rate, opting for a more aggressive approach in its first rate cut in four years. Meanwhile, grocery store chain La Comer has seen its stock rise 4.5% following its replacement of Grupo Elektra in the Mexican Stock Exchange indices. Additionally, a Fitch Ratings director indicates that Mexico is experiencing more downgrades than upgrades.

This is the week in finance!

Fed Cuts Interest Rates by 50 Basis Points, First Since 2020

The US Federal Reserve announced a 50 basis point interest rate cut, lowering the benchmark rate to 4.75%-5%, its first reduction since the early COVID-19 pandemic. This decision, driven by easing inflation and a slight increase in unemployment, was supported by an 11-1 vote, with further rate reductions expected later in the year. Despite the cut, the Fed continues its quantitative tightening program, gradually reducing its bond holdings while GDP growth remains strong and inflation slightly exceeds the 2% target.

La Comer Shares Up 4.5% on Expected S&P/BMV IPC Inclusion

Shares of Grupo La Comer rose 4.53% on the Mexican Stock Exchange (BMV) amid expectations of its inclusion in the S&P/BMV IPC, Mexico's benchmark stock index, replacing Grupo Elektra. The stock's rise follows strong financial results for the second quarter, driven by increased sales and promotions. Despite recent gains, La Comer's shares are still down nearly 22% year-to-date, with some analysts viewing the company as undervalued.

Mexican Corporate Credit: Key Themes and Trends

The credit outlook for Mexican corporations in 2024 is cautious, with downgrades outpacing upgrades due to pressures from moderate inflation, high interest rates, and regulatory uncertainty, writes Fitch Ratings’ Senior Director Alberto Moreno. While some sectors remain resilient, economic and political uncertainties, including upcoming elections and potential judicial reforms, are expected to weigh on credit quality. 

Revolutionizing Financial Pools for Economic Empowerment

Moneypool simplifies social money collection in Mexico through a platform that manages payments for events or shared purchases, generating revenue from fees on credit and debit card transactions, says CEO and Co-Founder Ignacio Álvrez. Since its launch, Moneypool has evolved by addressing chargeback issues and optimizing payment systems, achieving significant growth, including US$2.4 million in sales in 2023.

In August, Afores with the highest capital gains of the year

The Afores (Retirement Fund Administrators) in Mexico saw significant gains of MX$231.3 billion in August 2024, the highest this year, driven by the positive performance of the debt market following interest rate cuts. So far in 2024, Afores have accumulated MX$457.2 billion in gains, a 190% increase compared to the same period last year.