Mexico keeps interest rate steady at 4.50%

    Mexico’s central bank kept its benchmark overnight lending rate unchanged at 4.50 percent, as expected, striking a balance between upside risks to inflation from higher agricultural prices against downside risks from a weaker global economy.

    “The Governing Board considers that the current stance of monetary policy is conducive to achieving the goal of permanent inflation of 3 percent,” Banco de Mexico said in a statement.

    The bank said higher inflation in June was due to higher vegetable prices but it expected that impact to be temporary and core inflation had remained stable. Economic activity in Mexico continues to remain positive and exports and domestic demand were holding up well.

    The Mexican central bank has held interest rates steady since June 2009 and in June inflation rose to 4.3 percent, above the bank’s target of 3.0 percent, plus or minus one percentage point.

    “As for the balance of risks to the growth of the Mexican economy, it is considered that they continued to deteriorate, reflecting the intensification of the downside risks to the global economy,” the bank said.

    The bank noted the deterioration in economic activity in Europe and a moderation in U.S. where there is uncertainty about the impact on the economy from fiscal changes in 2013.

    It also said growth in emerging markets was decelerating and this was leading to expectations of lower inflation in 2012 and 2013, triggering a monetary loosing in many countries.

    ”It is even probable that in many economies of both groups adopted more accommodative monetary stances in the coming months, leading them to an unprecedented level of laxity,” the bank said.

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