Bloomberg News

Mexico Peso Rises as Inflation Data Damps Rate-Cut Speculation

January 24, 2012

Jan. 24 (Bloomberg) -- Mexico’s peso strengthened the most in three days after higher-than-forecast inflation in the Latin American country damped speculation policy makers may cut interest rates.

The peso rose 0.5 percent to 13.0998 per U.S. dollar at the close in Mexico City, from 13.1685 yesterday. The currency has appreciated 6.4 percent this year.

Mexico’s national statistics agency said consumer prices rose 0.32 percent in the first half of January, compared with the median forecast of 16 analysts in a Bloomberg survey for a 0.24 percent increase. The statistics agency known as Inegi said core prices, excluding food and energy, rose 0.2 percent during the period, compared with a median forecast of 0.15 percent from 13 economists surveyed by Bloomberg.

While it’s not enough to “justify a recalibration of monetary policy,” the peso is rising on the inflation numbers, Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co., said in a telephone interview from New York. “What it does show is that Mexico is unlikely to cut rates any time soon.”

Mexico’s central bank left the benchmark lending rate at a record low 4.5 percent on Jan. 20, matching forecasts from all 20 economists surveyed by Bloomberg, and said the recent jump in consumer prices wasn’t a reflection of core inflation.

Mexico’s economy grew 3.75 percent in November from a year earlier, according to the statistics agency’s proxy for gross domestic product released today on its website. Economists expected an expansion of 3.55 percent, according to the median estimate of 15 analysts surveyed by Bloomberg.

The yield on Mexico’s peso-denominated bonds due in 2024 declined one basis point, or 0.01 percentage point, to 6.33 percent, according to data compiled by Bloomberg. The price of the securities rose 0.12 centavo to 132.29 centavos per peso.

--With assistance from James G. Neuger in Brussels, Rainer Buergin in Berlin and Nacha Cattan in Mexico City. Editors: Glenn J. Kalinoski, Richard Richtmyer

To contact the reporter on this story: Ben Bain in New York at bbain2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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