Mexico Sees No Risks on Horizon to Inflation Targets, Meade Says

Mexico doesn’t foresee risks to keeping inflation from exceeding targets as rising food prices caused by the worst drought on record come under control, Finance Minister Jose Antonio Meade said.

Inflation expectations are well-anchored in the short, medium and long term and inflation linked to services has remained steady, Meade said yesterday at an event in Mexico City hosted by Bloomberg.

Mexico’s annual inflation has accelerated for three consecutive months as a drought sparked price increases in staples including corn, tomatoes and beef. Inflation reached 3.8 percent in December, the highest in 12 months and approaching the upper limit of the central bank’s target range of 2 to 4 percent.

“There’s nothing on the horizon that makes us think that inflationary targets are at risk,” Meade said. “The drought has not yet had a strong impact in production regions. Its impact has been contained.”

The central bank, led by Governor Agustin Carstens, on Jan. 20 kept the benchmark interest rate at 4.5 percent for a 24th consecutive meeting, saying “the current monetary policy posture is conducive to reaching the permanent inflation target,” according to the meeting’s minutes.

January Prices

Analysts expect inflation to reach 3.97 percent in January, according to the median estimate of 14 economists surveyed by Bloomberg. January figures for consumer prices will be released today by the national statistics agency.

“Certainly, as happens frequently with inflation, there will be one-time elements that impact the index,” Meade said.

Annual inflation was probably 4 percent in January, Alonso Cervera, an economist at Credit Suisse Group AG, said in a Feb. 8 research note. Cervera raised his monthly inflation estimate for January to 0.67 percent from 0.60 percent on food prices.

Economists raised their median estimate for year-end inflation to 3.78 percent in a Feb. 7 bi-weekly survey by Citigroup Inc.’s Banamex unit. They had projected a 3.74 percent rate in the previous survey.

If the recent positive economic data out of the U.S. becomes a trend, Mexico could expand “a bit more” than the 3.5 percent forecast by the ministry, Meade said at the event yesterday. Latin America’s second biggest economy will expand around 3.5 percent in 2012 from an estimated 4 percent in 2011, Meade had said Jan. 5.

Analysts forecast growth at 3.2 percent this year, according to the Feb. 7 Banamex survey.

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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