Mexican Central Bank Stays On Hold
Mexico’s Monetary Policy Inflation Dynamics (% y/y)
Source: Banxico and RGE
The cental bank of Mexico (Banxico) stayed on hold at its April meeting—leaving the monetary policy rate at 4.5%, as expected. Banxico’s communiqué highlights the multispeed recovery throughout the globe (with emerging markets growing stronger than developed markets).
It also mentions uncertainty regarding the sustainability of the US recovery once economic stimulus is withdrawn; fiscal problems in Europe; and the impact of Japan’s earthquake. Domestically, Mexico’s economy has continued to accelerate, as suggested by various activity indicators, and the output gap is expected to close by mid-year. Still, labor markets, credit markets and installed capacity continue to show economic slack, as does the reduction of the current account deficit. Inflation dynamics have been positive in Q1 2011, aided by a strong currency, limited wage pressures and base effects. However, Banxico expects inflation to reverse in the following months, affected by upward risks to commodity prices. The communiqué states that Banxico will watch the behavior of inflation expectations, output gap, commodity prices and other inflation determinants, and will adjust its monetary policy stance if unexpected pressures on prices rise, in order to meet its 3% inflation target.
Editor’s Note: This post is excerpted from a longer analysis available exclusively to RGE Clients, “Brazil Likely to Hike Rates in April; Mexico Stays On Hold.”
All rights reserved, Roubini GlobalEconomics, LLC. Opinions expressed on RGE EconoMonitors are those of individual analysts and may or may not express RGE’s own consensus view. RGE is not a certified investment advisory service and aims to create an intellectual framework for informed financial decisions by its clients. This content is for informational purposes only and does not constitute, and may not be relied on as, investment advice or a recommendation of any investment or trading strategy. This information is intended for sophisticated professional investors who will exercise their own judgment and will independently evaluate factors bearing on the suitability of any investment or trading strategy. Information and views, including any changes or updates, may be made available first to certain RGE clients and others at RGE’s discretion. Roubini Global Economics, LLC is not an investment adviser.
Comments are closed.