Bank of Mexico Policy Unchanged

January 15, 2010

The central bank as expected left its overnight interbank funding rate steady at 4.5%, where such has been since mid-July.  Seven cuts totaling 375 basis points from a peak of 8.25% were implemented in 2009: 50 bps in January, 25 bps in February, 75 bps in March, April and May, 50 bps in June and 25 bps in July.  A statement from Mexican monetary officials predicted sub-trend growth in 2010 and targeted 3.0% inflation by late 2011, although it conceded inflation would rise this year from its present 3.9% because of various planned increases in taxes and administered prices.  However, these impulses were called temporary.  Officials will keep a close watch on measures of expected inflation and promised to be vigilant should “unexpected pressures” arise.  The latest readings of on-year GDP growth and industrial production remain well into the red at minus 6.2% and minus 5.2%, but their direction is now positive.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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