Mexico Dollar Sale Plan Creates Leeway on Rates, Rodriguez Says

Mexico’s move to support the peso last week will give the central bank more flexibility in setting interest rates to shore up the economy as global growth slumps, said Deputy Finance Minister Gerardo Rodriguez.

The currency-exchange commission said on Nov. 29 that the central bank will auction $400 million daily at a peso exchange rate at least 2 percent weaker than the previous day’s level, a mechanism that aims to stabilize the peso when it plunges. The currency has rallied 4 percent since the auction announcement, paring its decline this year to 8.5 percent. It rose 1.3 percent to 13.4681 per dollar at 8:28 a.m. in Mexico City.

“What the central bank needs is an environment of certainty,” said Rodriguez, 39, in an interview at Bloomberg headquarters in New York on Dec. 2. If the dollar sale program “ultimately contributes through these channels for the bank to have more leeway, then the better. What you want to have in this current environment is as much flexibility as possible with the macro policy put in place,” he said.

The central bank kept its benchmark interest rate at a record low of 4.5 percent on Dec. 2, holding off a reduction predicted by some analysts and saying the recent currency slump and a possible pickup in agriculture prices may drive up inflation.

Mexico last used the dollar auction mechanism to shore up the peso following the 2008 collapse of Lehman Brothers Holdings Inc., which pushed the currency to a record low of 15.5892 per dollar.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net

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