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 Business News | June 2008 
Mexico's Calderon Nudges Central Bank on Rates
 Veronica Gomez & Michael O'Boyle - Reuters
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 |  | Our inflation rate is nearly the same as in the United States, but our interest rates are higher.
- President Felipe Calderon |  | | | |
Mexico City - Mexican President Felipe Calderon said on Wednesday the central bank should consider relatively tame inflation when setting monetary policy, in what was seen as a stab at policy-makers' independence.
"Our inflation rate is nearly the same as in the United States, but our interest rates are higher," Calderon said at an event in the Mexican state of Puebla.
"Hopefully our independent monetary authorities here, like the Bank of Mexico, will someday take this into consideration when setting monetary policy for interest rates," he said, according to a transcript of his speech.
Mexico's central bank, which has used its independence over more than a decade to gain the respect of investors and limit inflation expectations, has held its benchmark overnight interest rate steady at 7.5 percent since October.
The Mexican rate is almost four times its U.S. equivalent, the federal funds target rate, which is at 2 percent.
"That is making Mexican companies less competitive," Calderon said.
Consumer prices last year in Mexico rose less they did in the United States, though Mexican annual inflation in April was 4.55 percent, higher than the U.S. rate of 3.9 percent.
Market players were taken aback by Calderon's remarks. While the president mentioned the central bank's autonomy, investors were wary about political influence on interest rates.
"It's absurd," said Rodolfo Navarrete, head of analysis at Vector brokerage in Mexico City. "Mexico won its investment grade precisely because it has an autonomous central bank."
(Writing by Jason Lange; Editing by James Dalgleish) |
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