Key Mexican Central Bank Rate Left at 4.5% as Expected

March 4, 2011

After 375 basis points of reduction from 8.25% to 4.5% during the first seven months of 2009, the benchmark Bank of Mexico interest rate has not been changed since July 2009.  Analysts are not expecting an increase until late 3Q or the fourth quarter of this year.  The statements of policymakers have become less dovish.  Today’s offering says, “the Board will monitor the behavior of the expectations of inflation, the output gap, public administered prices, and with special attention, the prices of grains and other commodities as well as various determinants of inflation that could alert it to unexpected pressures.”  Although inflation of 3.8% exceeds the medium-term 3.0% goal, such reflects commodity prices while core inflation has behaved better, and the economy continues to operate below full usage of productive resources.  Dynamic demand for Mexican exports enabled GDP to growth around 5% in 2010.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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