|
|
|
 Business News | January 2008 
Mexico Central Bank May Keep Rates Unchanged Amid U.S. Slowdown
 Bill Faries - Bloomberg
go to original
Mexico's central bank will probably keep its benchmark lending rate at the highest in almost two years as a slowing U.S. economy and lower-than-forecast industrial production outweigh inflation concerns.
The five-member bank board led by Governor Guillermo Ortiz will keep the overnight rate at 7.50 percent for the fourth straight month, according to all 27 economists surveyed by Bloomberg. The board will release its decision at 10 a.m. New York time today.
"I don't see the advantage in raising rates,'' said John Welch, chief Latin America economist at Lehman Brothers in New York. "The industrial production figures were quite weak and both Finance Minister Carstens and Ortiz are talking about a slowdown."
Decelerating growth in the U.S., which buys about 80 percent of Mexico's exports, is already affecting its southern neighbor, Welch said. Mexico's main stock index has fallen 9.6 percent this year to its lowest in 10 months on concerns a U.S. economy hampered by the collapse of the subprime-mortgage market will cut demand for Mexican-made goods.
Mexico's industrial production grew 0.8 percent in November from a year earlier, half the rate forecast by economists, led by declines in oil production. Manufacturing grew 0.3 percent, the Finance Ministry said earlier this week.
Industrial production will remain "sluggish" this quarter, Barclays Capital said in a Jan. 16 report. Citigroup Inc. yesterday cut Mexico's growth forecast for this year to 2.9 percent from a previous forecast of 3.6 percent.
Bank's Predictions
The central bank predicts economic growth will quicken to 3.25 percent to 3.75 this year from 3.2 percent in 2007.
Ortiz may face some pressure to raise rates after Mexico's core inflation quickened to the fastest annual rate since 2002 in December. Consumer prices, excluding food and energy costs, rose 4 percent. The central bank said inflation may reach 4.5 percent this year before slowing to 3 percent by 2009.
To help rein in consumer prices, President Felipe Calderon cut highway tolls in December, convinced retailers including Wal-Mart de Mexico SAB to sell basic food products at a discount in the first three months of 2008 and reduced industrial power rates by as much as 30 percent this year.
Recent jumps in food prices aren't showing signs of spreading to wages and long-term price expectations, Ortiz said Jan. 11.
`Not Immune'
"The Mexican economy is much better prepared to weather a deceleration in the U.S., but we're not immune," said Guillermo Jose Aboumrad, senior economist at Banco UBS Pactual in Mexico City.
The peso has weakened 0.4 percent this year to 10.95 pesos per dollar yesterday, on concern that exports may slow. Declines have been tempered by speculation that the U.S. Federal Reserve will cut its benchmark rate by at least a half-percentage point during its Jan. 30 meeting.
Interest-rate futures on the Chicago Board of Trade yesterday showed a 100 percent likelihood the Fed will lower the target for the overnight lending rate between banks by at least a half-percentage point to 3.75 percent on Jan. 30. The chance of a cut to 3.5 percent this month was 54 percent. Traders also saw a 71 percent chance the rate will drop to 3 percent or lower by the end of April.
To contact the reporter on this story: Bill Faries in Buenos Aires at wfaries(at)bloomberg.net |
| |
|
Vallarta Weddings
Tell a Friend
Site Map
Print this Page
Email Us