Monday, December 5, 2011

Banco de Mexico Keeps Interest Rate at 4.50%

The Banco de Mexico held its overnight interest rate target steady at 4.50%.  In its monetary policy statement the Bank noted: "Annual general inflation and its core and non-core components have shown a favorable evolution, although there was a slight increase recently," further noting a "persistent slack in the economy, a declining trend in unit labor costs" and "increased levels of competition in some sectors of the economy," adding"in addition, inflation expectations have not been affected by the recent depreciation of the exchange rate," also commenting that "a currency rate anchored by solid fundamentals of the Mexican economy."

The Mexican central bank also kept the overnight interest rate target steady at 4.50% at its previous meeting.  Mexico reported annual inflation of 3.2% in October, 3.14% in September, compared to 3.42% in August, while inflation was 3.28% at the end of June, 3.4% April and 3% in March, and within the Bank's inflation target range of 3% +/- 1%. 

The Mexican economy grew 3.3% (4.6% in Q1) year on year in Q2 this year, up 1.1% (0.5% in Q1) from the previous quarter, compared to GDP growth of 5.4% in 2010.  The Mexican peso (MXN) is down about 11% against the US dollar so far this year, and the USDMXN exchange rate last traded around 13.5.


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