Bank of Mexico: Key Overnight Interest Rate Left at 4.5%

November 30, 2012

The streak of unchanged monetary policy following a cut in July 2009 has been extended, and the more sanguine tone of today’s statement from the Governing Board suggests that many more months may pass before a policy change is next enacted.  Growth prospects have softened: “Economic activity in Mexico has maintained an upward trend, albeit at a more moderate pace than in previous quarters.”  And transient price shocks over the summer have not spread into the core inflation rate: “although inflation is still located above the upper bound of the interval of variability of more or less one percentage point around the target of 3 percent, is likely to finish under 4 per cent at the end of this year.”  The statement goes on to say that policymakers will continue to monitor relevant trends and are prepared to raise the key interest rate if necessary, but the language is less strident than before.  When inflation peaked in September, officials spoke with greater vigilance, asserting “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.”

In response to the Great Recession the Bank of Mexico’s key interest rate was slashed from 8.25% to 4.5% over the first seven months of 2009.

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



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