Bank of Mexico Leaves Policy Rate at 4.5%

March 20, 2010

Mexico’s key central bank interest rates has been at 4.5% for the past eight months after cuts last year from a peak of 8.75% of 50 basis points in January, 25 bps in February, 75 bps each in March, April and May, 50 bps in June and 25 bps in July.  The rate will remain at 4.5%, according to a new statement of policy intent and in all likelihood will not be raised for a couple of more months.  The statement, like the one in February, notes that GDP has been recovering faster than anticipated and notes that CPI inflation has accelerated from 3.57% at end-2009 to 4.83% in February in part because of the pass-through of higher taxes.  The statement remains hopeful that the target inflation rate of 3% can be reached by end-2011 because of moderately advancing wages, peso appreciation and anchored inflation expectations.  Employment still lies below its 2008 level.  However, expected inflation, though steady, is above the medium-term target, and officials pledge that they will watch medium-term and long-term price expectations carefully and that a modification of the policy stance is likely to be needed to secure the inflation goal.  Analysts had not been expected a change in the policy rate this month.

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



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