Mexico's central bank raises key rate as peso falls

Mexico's central bank raised its key interest rate on Thursday, citing inflationary pressure, the peso's record drop and the risk of financial volatility linked to the US presidential election.

The Banco de Mexico hiked the overnight interbanking rate by half a percentage point to 4.75 percent.

"With this action, we seek to counter inflationary pressure and maintain expectations on inflation well-anchored," the bank said in a statement.

The national currency fell to the psychological level of 20 pesos per dollar this month.

Analysts partly attribute the drop to concerns about Republican presidential candidate Donald Trump's potential victory in the US November 8 election, which could hurt Mexico due to his demand that the country pay for a massive wall across the border.

The bank's statement cited the risk of more volatility in international financial markets "especially if nervousness about the possible consequences of the electoral process in the United States worsens."