| | |  Business News | July 2008 
Mexico Says Inflation May Have Peaked
 Jason Lange - Reuters
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| | Mexican Finance Minister Agustin Carstens | | |
Mexico City - Mexican Finance Minister Agustin Carstens said on Wednesday the country's inflation rate may have peaked for the year though bad weather could still cause some surprising increases in food prices.
Asked if Mexican inflation had hit its worst point, Carstens told local television: "Perhaps yes."
Soaring world food prices pushed Mexico's 12-month inflation to 4.95 percent in May, its highest in more than three years.
Mexico has escaped some of the worst of world inflation pressures by pouring money from oil exports into gasoline subsidies.
Carstens later told Mexican radio that the subsidies could continue without pressuring the federal budget and that net revenue from the oil sector will still come in above budget forecasts this year.
"For the whole year, I think there will be excess revenues," Carstens said. "We have the strength to continue paying the subsidy."
Mexico is the world's No. 6 producer of crude oil but imports about 40 percent of its gasoline. The oil sector provides about one third of government revenue, though the government expects to spend around $19 billion on fuel subsidies this year.
High inflation rates this year led Mexico's central bank to raise its key overnight interest rate by 25 basis points last month to 7.75 percent in order to try to cool inflation.
Mexico's finance ministry does not play a role in deciding interest rates in Mexico, though the government has put some pressure this year on central bankers, saying the spread between Mexican and U.S. rates was too high.
Carstens said core inflation, a key reading of consumer prices, is currently not a problem.
"It is rather under control. We can say it hasn't jumped," Carstens said, noting that market analysts see inflation finishing the year below 5 percent.
But he said prices for some products could rise unexpectedly.
"For example, a few weeks ago, there were some massive floods in the central part of the United States where a lot of corn is produced. This type of phenomena could affect future prices," Carstens said.
Local and foreign analysts polled by the central bank in late June forecast that consumer prices will rise 4.74 percent this year.
(Additional reporting by Chris Aspin; Editing by Jan Paschal) |
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