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 News Around the Republic of Mexico | January 2005 
Mexican Inflation to Fall Faster on Fox Plans
 Bloomberg
 Mexican inflation will fall "faster than we expected" in 2005 because of President Vicente Fox's plans to cut electricity rates, reduce import tariffs and lower sugar prices, a central bank deputy governor said.
The measures, which Fox announced yesterday in Mexico City, will help the central bank lower the annual inflation rate to its target of 2 to 4 percent next year from 5.4 percent in the 12 months to November, said Guillermo Guemez, one of the bank's four deputy governors. Central Bank Governor Guillermo Ortiz said on Dec. 13 that inflation would start easing in the second quarter.
"This package helps the headline inflation rate have a more moderate trend," Guemez said in an interview in Mexico City. "If food items such as fruits and vegetables behave favorably as we expect, it will help core inflation fall faster than we expected."
Fox, 62, stepped up efforts to slow inflation after the central bank failed to stem the rise in consumer prices through nine interest rates increases this year. State-regulated prices such as electricity rates rose 10 percent in the 12 months to November, contributing to faster inflation.
Mexico will cut duties on $11 billion of imports and eliminate tariffs on natural gas, Fox said in a statement yesterday. Duties will fall 3 to 10 percentage points on goods imported from nations that don't have free trade accords with Mexico, he said.
In all, the measures will cost 4 billion pesos ($353 million) in revenue and may lead to spending cuts should tax receipts and economic growth not pick up, he said. |
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