MEXICO CITY Jan 29 Mexico's central bank is
weighing whether monetary policy needs adjusting after annual
inflation surged above its 4 percent tolerance ceiling, bank
governor Agustin Carstens said in an interview disseminated on
Annual inflation in early January shot up to 4.63 percent,
well above the central bank's limit of 4 percent. However,
policymakers have argued the surge will be temporary since it is
mostly due to the one-time impact of new taxes.
"We are going to have inflation above our range for some
months," Carstens told Web site Arena Publica in a video
interview posted on Wednesday.
"We are thinking, and it is an important issue which will be
discussed at the monetary policy meeting ... about how long this
increase will last, whether it will become generalized or
whether it will require an adjustment in the monetary stance,"
The central bank's board issues its next scheduled monetary
policy statement on Friday. Analysts in a Reuters poll last week
unananimously forecast the bank would keep its benchmark
interest rate steady at 3.5 percent as policymakers look to
support an economic recovery..
The central bank lowered borrowing costs in September and
October after an economic contraction in the second quarter and
policymakers have been expected to keep borrowing costs steady
amid a tepid recovery in U.S. demand for Mexican exports.
Preliminary data shows some food prices are higher than they
should be, Carstens said, suggesting that was unexpected.
Other factors stoking inflation were higher public
transport prices and fiscal reform. The recently enacted reform
raised value-added taxes on soft drinks and junk food.
He said he expected the food prices to correct during the
year, while other prices linked to fiscal policy would correct
within a year.
In the Reuters poll last week, the median of analysts
surveyed projected the central bank will raise its benchmark
rate to 3.75 percent in the first quarter of 2015, pushing back
expectations for a hike in the second half of this year in the