| | |  Business News | December 2009 
Mexico's Inflation Seen Jumping; Remittances Slump
 Patrick Rucker & Michael O'Boyle - Reuters
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December 02, 2009
 |  | The Mexican economy began to emerge from a deep recession in the third quarter but central bank officials must weigh the uneven recovery with the threat of inflation as they strive for stable economic growth. |  | | |
Mexico City - Analysts watching Mexico sharply raised their inflation outlook for next year following tax hikes by Congress, a poll showed on Tuesday, which could put pressure on the central bank to raise interest rates.
The bank's monthly poll of economists and analysts in late November showed inflation expectations jumped to 4.86 percent in 2010 compared to a forecast of 4.54 percent a month earlier.
In a separate report, Mexicans living abroad sent much less cash to dependents at home in October as the global recession stung those migrants.
The Mexican economy began to emerge from a deep recession in the third quarter but central bank officials must weigh the uneven recovery with the threat of inflation as they strive for stable economic growth.
By holding its benchmark lending rate steady for the fourth straight month last week, the central bank signaled that it is still comfortable with low borrowing costs as a way to stimulate economic activity.
But in a statement explaining its thinking, the bank said it is committed to making sure medium-term inflation expectations remain "well-anchored."
Mexican lawmakers last month approved a new consumption tax that aims to boost government revenue hit hard by the economic downturn and waning oil resources. The central bank said it sees the new taxes having a "one-time" impact on prices and that inflation pressure will be mitigated by slow growth.
REMITTANCES FALL
Analysts expect the economy to grow 2.9 percent in 2010, the same as in October's poll. Policymakers said they will release new economic forecasts for 2010 and 2011 on Thursday.
That report could be one of the last shepherded by Gov. Guillermo Ortiz whose term as central bank chief concludes at the end of this year.
The remittance report showed Mexican cash transfers in October plunged 35.8 percent from a year earlier, the most on record, showing the deep impact of the recession in the United States, where most Mexican migrants live.
Mexican immigrants living abroad sent home $1.692 billion compared to $2.637 billion in the same month last year, which was the highest amount of cash recorded in a single month in data going back to 1995.
Remittances fell in 2008 for the first time on record, and the slump has continued this year, but a one-quarter devaluation of the Mexican peso during the credit crisis has helped fewer dollars go further back home.
(Editing by James Dalgleish)
michael.oboyle(at)thomsonreuters.com
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