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Mexico's Central Bank Cuts Benchmark Interest Rate

Mexico's central bank has cut its benchmark interest rate in an effort to counter an economic downturn.

The bank announced Friday that it has lowered the key interest rate by three quarters of a point to 6.75 percent. The decision surprised analysts who had not expected the bank to cut the rate by more than half a point.

Mexico's peso strengthened on news of the rate cut and was trading at 14.1 to the U.S. dollar. The peso has lost about 30 percent of its value against the dollar since August.

Mexico has been hit hard by the economic downturn in the United States. The Mexican economy contracted 1.6 percent in the last three months of 2008, and the country's central bank predicts another downturn in the first quarter of this year.

Some information for this report was provided by AP and Reuters.