| | |  Business News 
Carstens Says Tax Increases Won’t Stoke Inflation
 Andres R. Martinez & Thomas Black - Bloomberg
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January 09, 2010
| | Mexican central bank Governor Agustin Carstens | |
Mexican central bank Governor Agustin Carstens, speaking publicly for the first time since taking up the post Jan. 1, said gains in the currency will partially offset the temporary impact on inflation from tax increases.
Mexican inflation has absorbed price increases “well,” Carstens said at a conference in Mexico City, adding that it’s important to understand the increases are coming from the government raising taxes and state-controlled prices.
“The direct impact on prices is limited, and will be transitory and fade after a year,” Carstens, 51, said.
The peso rose 0.6 percent to 12.7117 per dollar at 12:39 p.m. New York time from 12.7854 yesterday. The peso has risen 3 percent against the dollar in 2010, the best performance among the 16 most-traded currencies tracked by Bloomberg.
Carstens took over as central bank governor after serving three years as President Felipe Calderon’s finance minister. He replaced Guillermo Ortiz, 61, who served two six-year terms.
The government began raising prices on gasoline and cooking gas in December, adding to tax increases that include a percentage point increase in the sales tax to 16 percent.
The central bank has forecast annual inflation will climb to as high as 4.75 percent in the first quarter, 5 percent in the second quarter and 5.25 percent in the third and fourth quarters, boosted in part by higher gasoline and electricity prices.
Annual inflation in December was 3.57 percent, the lowest since 2006.
Carstens said the central bank won’t be passive, and reiterated he will uphold the bank’s mandate of maintaining price stability. He repeated that he will seek closer coordination with the federal government without compromising the bank’s independence.
To contact the reporters on this story: Andres Martinez at amartinez28(at)bloomberg.net; Thomas Black in Monterrey at tblack(at)bloomberg.net.
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