Bank of Mexico Sees Improving Growth Juan Montes - MarketWatch | |
go to original March 16, 2012 |
MEXICO CITY - The Bank of Mexico kept interest rates unchanged Friday for its 25th meeting in a row, as was unanimously expected, while offering an upbeat assessment of both economic growth and inflation ahead.
The Mexican central bank left its overnight lending rate target at 4.5%, reiterating that it would consider the need to cut rates if global economic growth prospects worsen. The bank also said it could adjust rates if generalized inflation pressures crop up, and reiterated its commitment to meet its 3% inflation target.
The decision was in line with expectations. All 18 analysts consulted by Dow Jones Newswires had expected the bank to leave the rate at 4.5%, where it has been since July 2009.
The Bank of Mexico, which has a reputation of being prudent and avoiding hasty policy decisions, has been adopting a wait-and-see approach as growth prospects for the country remain steady and inflation seems relatively under control.
The central bank's postmeeting statement said that the growth outlook has improved in recent weeks, mainly due to the better-than-expected growth prospects in the U.S., where Mexico sends almost 80% of its exports, and less probability of a catastrophic event in the euro zone.
Mexico's inflation outlook has also improved, as the impact on prices from the worst drought ever recorded in the north of the country has started to diminish and the likelihood of an external shock coming from Europe has decreased.
The central bank said it expects inflation will be within target for 2012. The bank expects inflation measured by the consumer price index to be between 3% and 4% this year. Its specific target is 3%.
The Bank of Mexico also said the peso's recent appreciation is expected to limit even more the possible pass-through of foreign exchange pressures on prices. The peso has appreciated more than 9% this year, recently trading at MXN12.6750 to the U.S. dollar.
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