Mexico Rate Decisions to Weigh Policy Stance in Other Countries

Mexican central bank policymakers, who cut the benchmark rate this year for the first time since 2009, said they will take into account the lax monetary policies being carried out in other countries in future decisions.

Wealthier countries may find ways to further ease monetary policy, bank Governor Agustin Carstens told reporters in Mexico City today at the release of the quarterly inflation report. Latin America’s second-biggest economy showed signs of weakness in the first quarter, when growth moderated, he said. The economy will expand 3 percent to 4 percent this year, the report said.

The central bank, known as Banxico, maintained its 2013 growth and inflation forecasts in a quarterly report published today. Policymakers, led by Carstens, cut the benchmark rate to 4 percent from 4.5 percent in March. The bank held the rate at its April 26 meeting, making no direct mention of a possible rate move.

The bank said today it would remain alert to the impact of certain price changes as well as “the evolution of Mexico’s relative monetary policy compared to other economies.”

Consumer prices rose 4.72 percent in the first half of April, the national statistics agency reported April 24.

Inflation “should be expected to remain at elevated levels in April and May and resume a downward trend from June to settle in the second half of the year between 3 and 4 percent,” the bank said in a statement accompaning its April rate decision. “For 2014 we anticipate headline inflation will settle very close to 3 percent.”

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

To contact the editor responsible for this story: Bill Faries at wfaries@bloomberg.net

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