| | |  Business News | October 2008 
Mexico Central Bank Will Probably Keep Rate Steady: Week Ahead
 Jens Erik Gould - Bloomberg
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| | Guillermo Ortiz, Governor of the Central Bank Of Mexico listens during a debate at the World Economic Forum in Davos 23 January 2008. (AFP/Getty) | | |
Mexico's central bank will probably keep its benchmark interest rate unchanged this week on concern that inflation may accelerate even as economic growth slows.
Banco de Mexico will maintain the lending rate at 8.25 percent on Oct. 17, according to 12 of 13 economists surveyed by Bloomberg. The other analyst predicts a cut. The median forecast of analysts surveyed on Oct. 6 by Citigroup Inc.'s Banamex unit was for an unchanged rate through the end of the year.
It's too early to tell if inflation is under control after prices rose at the quickest pace since 2002 this year, Deputy Central Bank Governor Guillermo Guemez Garcia said Oct. 9. While the global credit crisis is hurting growth, a rate cut at this time would only be justified if the economy was in crisis, said Ricardo Aguilar, an economist at Invex Casa de Bolsa SA.
"Even though there's more risk and some Mexican companies are declaring bankruptcy, the economy isn't in too much risk," said Mexico City-based Aguilar, who predicts a rate cut early next year. "They shouldn't hurry to do something they'll do eventually."
President Felipe Calderon was forced to revise his 2009 budget proposal last week because of the global credit crisis, lowering forecasts for economic growth and oil prices. He also proposed a stimulus package equal to 1 percent of gross domestic product that includes spending on infrastructure, energy and education to help the economy weather the crisis.
Annual inflation slowed in September for the first time in eight months, to 5.47 percent from 5.57 percent in August, because of lower prices for agricultural products. August's inflation was the fastest in more than five years.
Stocks, Bonds, Peso
Mexico's benchmark Bolsa index fell 13 percent last week to 19905.27, its sixth decline in seven weeks. Controladora Comercial Mexicana SAB, the owner of supermarkets and Costco stores in Mexico, fell 90 percent as exposure to currency derivatives forced it to file for bankruptcy reorganization.
Yields on the government's benchmark 10 percent bond due in 2024 rose 71 basis points, or 0.71 percentage point, to 9.11 percent. The bond's price fell 6.6 centavos to 107.44 centavos per peso, according to Banco Santander SA.
The peso fell 14 percent last week, even as the central bank auctioned $8.9 billion in three days in a bid to prop up the currency. The peso closed at 13.093 per dollar on Oct. 10.
The following is a list of events in Mexico next week:
Event Date Forecast Gross Fixed Investment for July Oct. 13 +8.0% Mexico September Auto Production Oct. 13 -- Annual Report on Food Production Oct. 15 -- Unemployment Rate for September Oct. 16 4.1% Overnight Rate Decision Oct. 17 8.25% Industrial Production for August Oct. 17 -0.5%
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net. |
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