Friday, April 25, 2014

Mexico holds rate, watching inflation expectations, slack

    Mexico's central bank maintained its policy rate at 3.50 percent, as expected, saying it was closely following inflationary expectations, including the slack in the economy, and the effect of this on its monetary stance relative to that of the United States.
    The Bank of Mexico, which cut its target for overnight rates by 100 basis points in 2013, said inflation has been declining since the second half of January, as it expected, resulting in a downward revision of inflationary expectations for the current year to below 4 percent while long-term expectations have remained stable.
    Overall, the central bank said the balance of risks to inflation were unchanged since its previous meeting in March, while "the outlook for global economic growth has improved marginally, overriding certain downside risks."
    Mexico's headline inflation rate eased further to 3.76 percent in March following a spike in January from higher taxes and public transportation prices, the latest confirmation of the central bank's expectation that price changes last year and early this year were not going to lead to second-order effects on general inflation.
    The central bank, which targets inflation of 2.0 to 4.0 percent, said global inflation is also expected to remain at low levels, and in most advanced economies even below the target of central banks, so monetary policy is expected to remain accommodative.




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