Top Forecaster Says Mexico May Raise Rate Any Moment on Peso

  • Vector analyst says currency pass-through to spur Banxico move
  • Pemex financial concerns triggering peso slump, Navarrete says

Mexico’s central bank will probably raise its key interest rate before the U.S. Federal Reserve, and may do so without waiting for its own board meeting next month, according to Vector Casa de Bolsa.

Vector’s economist Rodolfo Navarrete, who was ranked by Bloomberg as the top forecaster of the Mexican economy for the fourth quarter, said policy makers will raise the 3.25 percent rate as part of efforts to prevent the peso’s plunge to record lows from stoking inflation, which he said is already happening.

"A central bank intervention is just a question of days," Navarrete said in a telephone interview from Mexico City. If the exchange rate remains at levels reached Thursday, "Banco de Mexico will have to do something."

The peso has fallen 11 percent against the U.S. dollar this year, the worst performance among the 16 major currencies tracked by Bloomberg worldwide. The currency on Thursday fell as much as 2.7 percent to a record low 19.4448 per dollar before trimming the decline to 19.1631 at 1:52 p.m. in Mexico City.

The most recent depreciation was sparked by announcements this week that Mexico will cut spending at state-owned Petroleos Mexicanos, spurring concern about the company’s finances, Navarrete said.

Interest-rate swaps show traders are betting Banco de Mexico will raise interest rates by about a quarter point by its May 5 meeting. The central bank’s next rate decision is scheduled for March 18. A survey released Feb. 5 by Citigroup Inc.’s Banamex unit shows economists expect the next rate increase in June, with Barclays Plc and Credit Suisse Group AG among the banks predicting a March increase.

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