MEXICO CITY Feb 8 Mexico's central bank must
remain vigilant on inflation despite a recent easing in the
headline rate to its lowest in more than a year, central bank
board member Manuel Sanchez said on Friday.
Sanchez, seen as the Banco de Mexico's toughest inflation
fighter, said the recent decline largely reflected one-off
factors and inflation expectations had not clearly improved.
"The short period of improvement in inflation, the
extraordinary factors which explain it and the lack of a
prolonged tendency towards the permanent objective mean that
monetary policy must remain vigilant," he said in a presentation
prepared for delivery in Monterrey.
Annual inflation slowed to 3.25 percent in January, the
fourth monthly decline in a row, and traders and investors
expect the Banco de Mexico to make good as early as April on
hints it might lower rates from the current 4.5 percent.
But Sanchez's comments made it clear he will take some
convincing. He noted that recent price falls in fresh food and
telecommunications prices were the main drivers of the slowdown.
"Positive shocks, sooner or later, disappear or can even
reverse course," he said. Mobile phone tariffs rose in January
after two months of falls due to year-end discounting.
Sanchez also said analysts' inflation expectations had not
clearly improved - something he said in an interview with
Reuters earlier this month would be key to declaring victory in
the battle against inflation.
Analysts surveyed by the central bank see inflation above
its 3 percent target in both the short and long term.