The Mexican central bank raised interest rates yesterday to their highest in more than seven years. The Bank of Mexico hiked rates by 50 basis points to 5.25 percent as the U.S. election result weakened the Mexican peso. This move by the bank was widely anticipated after Trump’s surprising win in the U.S. Presidential election sent the peso falling against the US dollar to fresh lows last week.

This move by the central bank is to help support and strengthen the peso and curb inflation. According to a Nordea Bank research report, the Bank of Mexico should have undertaken this move the day after the U.S. election result where an extraordinary meeting with the finance ministry was scheduled.

The Banxico repeated that it has no target for the exchange rate, that is the central bank would raise if the weaker peso passes through to inflation, but would not do anything about the peso weakening, noted Nordea Bank.

Following the announcement of a 50bps hike, the Mexican peso weakened immediately and further upside movement in the USD/MXN pair is likely in the very near term. But most of the adverse Trump-related risks would have to materialize to keep the peso weak in the medium-term, stated Nordea Bank.