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 Business News | October 2007 
Mexico's Carstens Vows to Control Rising Prices
 Patrick Harrington - Bloomberg
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| | Agutin Carstens, Mexico's finance minister, speaks before the lower house of Congress while Party of the Democratic Revolution members protest high food prices in the background in Mexico City, on Oct. 02, 2007. (Susana Gonzalez/Bloomberg News |
Mexican Finance Minister Agustin Carstens vowed that the government would act to control inflation should prices rise in an "unjustified" manner, attempting to deflect protests from opposition legislators.
Carstens, speaking before the lower house of Congress, said that while prices have risen recently and higher food costs would "surely" push up wages in 2007, inflation is not out of control "nor does it threaten to become so."
The government's promise to fight inflation highlights the pressure President Felipe Calderon faces as opposition political parties blame his administration for rising prices. Calderon on Sept. 26 postponed a new gasoline tax and halted fuel-price increases for the rest of 2007.
"We will not remain passive in the face of unjustified price increases," Carstens said. "The government will act with firmness in this respect."
Economists covering Mexico yesterday raised their inflation forecasts for 2007 and 2008, according to the first survey released by the Mexican central bank since Congress approved Calderon's tax bill.
Economists expect annual inflation to end 2007 at 3.81 percent, the Bank of Mexico said yesterday, compared with last month's forecast of 3.65 percent, according to the average estimate of 33 economists in a Sept. 24-28 survey.
Economists raised their expectations for 2008 inflation to 3.69 percent from 3.51 percent the previous month.
'Rising Prices'
Protesters gathered before Carstens's testimony at the lower house today and waved yellow flags with the logo of the Party of the Democratic Revolution, whose presidential candidate Andres Manuel Lopez Obrador lost last year's election to Calderon.
"With these rising prices we can't eat," said one sign attached to a bus parked in front of the lower house building.
A new 5.5 percent gasoline tax, part of the tax overhaul legislation passed by Congress Sept. 14, should not increase inflation by more than 10 or 20 basis points, Carstens said today.
The yield on the 10 percent bond due in December 2024, Mexico's most-traded security, fell 2 basis points, or 0.02 percentage point, to 7.93 percent at 4:40 p.m. in New York. The price, which moves inversely to the yield, rose 0.17 centavo to 119.30 centavos per peso, according to Banco Santander SA.
To contact the reporter on this story: Patrick Harrington in Mexico City at pharrington8@bloomberg.net |
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