Bank of Mexico: No Rate Change as Expected

September 9, 2012

Mexico’s target overnight interest rate has been at 4.5% since a cut in July 2009 that culminated 375 basis points of easing that year.  Friday’s central bank statement expects current above-target inflation of 4.4% versus a 3% goal to be temporary and due to supply side shocks.  Prior peso declines have been trimmed.  There is a global disinflationary trend, and expected inflation remains well-anchored.  But officials allowed for the possible need to raise interest rates of inflation prospects change.

Forward, the Board will remain attentive to the evolution of all the determinants of inflation, since the behavior of these could be advisable to adjust upward the reference interest rate. Attention turns to relative price changes, both those resulting from agricultural products, from fluctuations in the exchange rate, do not generate second order effect on the dynamics of inflation. However, the evolution of the relative monetary stance towards other countries, mainly the advanced will also be monitored. In any case the convergence of inflation to its permanent goal of 3 percent will be sought at all times.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.