Bloomberg News

Mexican Policy Makers Were Unanimous in June Rate Decision

June 22, 2012

Mexican policy makers were unanimous in their decision to keep the benchmark interest rate unchanged this month, according to the minutes of the meeting published today on the bank’s website.

Policy makers, led by Governor Agustin Carstens, kept borrowing costs on hold at 4.5 percent, the second-lowest level among major rate-setting central banks in Latin America after Peru. The rate has remain at 4.5 percent for 27 straight meetings.

Mexico and other Pacific coast nations in Latin America have kept rates unchanged as policy makers study the impact of the European crisis on their economies. Mexico may continue with its wait-and-see mode if policy makers expect Europe’s crisis to keep pressure on the country for months, BNP Paribas analysts including Florencia Vazquez wrote June 19.

“A rate hike will be unlikely given that a potential deepening of the eurozone crisis would represent increased risks to growth,” they wrote in the e-mailed note. “A rate cut will be unlikely given that any deterioration in eurozone conditions and heightened global risk-aversion would put depreciation pressures on the Mexican peso.”

The peso, which has weakened 7.4 percent against the U.S. dollar so far this quarter, rose 0.7 percent to 13.82 at 10:28 a.m. New York time today.

Inflation accelerated for the first time in four months in May as growth quickened and the peso weakened 9.5 percent in the month, the worst performance of the major Latin American currencies tracked by Bloomberg.

Prices rose 0.24 percent in the first two weeks of June, while annual inflation quickened to 4.30 percent from 3.85 percent in May, the national statistics agency said on its website today. Inflation exceeded the 2 percent to 4 percent target range.

Still, growth in Latin America’s second-largest economy will slow to 3.6 percent from 3.9 percent in 2011, the International Monetary Fund said in April.

To contact the reporters on this story: Randall Woods in Santiago at rwoods13@bloomberg.net; 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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