Bloomberg News

Carstens Says U.S. ‘Surprises’ May Fuel More Mexico Growth

May 18, 2012

The U.S. economic rebound may drive Mexico’s growth up further, while global turbulence makes it harder to assess the need for monetary policy changes, central bank Governor Agustin Carstens said.

Continued U.S. growth “surprises” could lead to greater expansion in Mexico, Carstens said in an interview at a banking convention in Acapulco today.

The central bank on May 16 raised its 2012 growth estimate for Latin America’s second-biggest economy to a range of 3.25 percent to 4.25 percent, up from 3 percent to 4 percent. Gross domestic product grew 4.6 percent in the first quarter from the year earlier, the fastest pace in six quarters, the national statistics institute said yesterday.

“If the U.S. economy continues giving us surprises in its capacity to enhance its rate of growth, that certainly would support Mexico,” Carstens said. “There is the possibility of seeing higher rates of growth in Mexico if that happens.”

Europe’s debt crisis has weakened the peso, easing pressure on the central bank to cut interest rates, he said. The bank is concerned that “contagion has advanced” in Europe.

Some economists had expected the central bank to cut its key lending rate April 27, when it left borrowing costs at a record low 4.5 percent for the 26th meeting. The inflation conditions that would have allowed for a reduction didn’t materialize, Carstens said.

“We’re living in a turbulent, volatile time and that certainly makes it difficult to assess what is the most adequate policy measure in the future,” Carstens said. “The exchange rate is very important, and certainly the depreciation is something that has held us back, but then there are many other factors that we consider and certainly it would not be appropriate to say that is the key factor.”

The peso has declined 4.6 percent against the dollar in the past month and 15.3 percent in last 12 months. The currency reversed declines, gaining 0.1 percent to 13.8218 at 3:01 p.m. in Mexico City from 13.8393 yesterday.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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