UPDATE 1-Mexico central bank rate cut was split 4-1 decision-minutes

Fri Mar 22, 2013 11:42am EDT

Related Topics

* First split interest rate decision on record

* One member argued inflation still a risk

* Board leaves open door to further easing if growth slows

MEXICO CITY, March 22 (Reuters) - Mexico's central bankers disagreed on their move to cut interest rates to a record low, minutes of their March discussions showed, marking their first divided rate decision since the bank began publishing minutes two years ago.

Banco de Mexico cut interest rates two weeks ago for the first time in nearly four years, taking borrowing costs to a new record low of 4.0 percent as policymakers bet they are winning the battle against inflation in Latin America's second-largest economy.

But the minutes, released on Friday, showed that one of the five members voted to keep rates on hold, arguing that recent data did not prove the case that inflation had been tamed, as the majority said.

The minutes also left open the door to a possible further easing in monetary policy down the track, should growth slow more than expected.

"The majority clarified that while the interest rate cut was a one-off, (the board) at all times will evaluate the most adequate monetary policy for the economic environment," the minutes said.

The cut was a bold move by the central bank as inflation has begun to quicken and consumer prices are expected to climb further in the coming months.

Before the meeting, central bank board member Manuel Sanchez had said a rate cut would be premature, arguing that both the downward trend in inflation and inflation expectations had yet to be confirmed.

The Banco de Mexico, as Mexico's central bank is called, had left rates unchanged since mid-2009, when Mexico was mired in a deep recession.

Although U.S. demand for manufactured goods supported growth last year, most policymakers saw a weak global environment and expressed concern about a slow recovery north of the border, the destination for almost 80 percent of Mexico's exports.

Most board members said the domestic economy had begun to show signs of slowing, reflecting weaker momentum in the global economy, which had also affected internal demand.

Mexico has forecast growth of 3.5 percent this year, down from 3.9 percent in 2012.

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