* Policymakers divided over signal to markets
* Some argued any cut should be a one-off
* Analysts trim 2013 inflation outlook
By Krista Hughes and Michael O'Boyle
MEXICO CITY, Feb 1 Mexico's central bankers
split over whether to send a signal they might cut interest
rates if inflation keeps cooling, according to minutes of their
Banco de Mexico board members unanimously decided to keep
the benchmark interest rate steady at 4.5 percent at their
monetary policy meeting two weeks ago, when they surprised
analysts by hinting they might lower rates in future.
The hint has prompted markets to price in a 25-basis-point
easing by June.
But the minutes showed one of the four board members argued
against suggesting a possible cut.
The minutes, released on Friday, also suggested that any cut
would be a one-off rather than the start of a new easing cycle,
leading some to speculate a cut might be 50 basis points or
"The majority of board members considered that the economy
could grow at a faster pace without observing inflation
pressures, in which case it would be possible to have a lower
level of rates without compromising convergence to the inflation
goal," the minutes said.
The dissenting board member argued that inflation, which
fell to its lowest level in more than a year in early January,
was still above the central bank's 3 percent target and said
that a cut could be premature. The bank has not changed rates
In a change from the statement released after the January
meeting, the minutes suggested the central bank might cut rates
even if growth accelerates: as long as this does not fan
inflation, which fell to 3.21 percent in early January. The
statement spoke of rate cuts in the context of lower growth and
Banorte analysts said they now expected a cut of 50-75 basis
points at the next meeting in March, although other economists
thought a cut in the second half of the year was more likely.
Some stuck with bets for no change at all.
"In our view, these have been the most dovish minutes we
have ever seen," Banorte analysts wrote in a note to clients.
NO HOME-GROWN PRICE RISKS
Board member Manuel Sanchez, who analysts suspect was the
lone dissenter on the cut hint, told Reuters on Tuesday the
recent easing in inflation was a good sign for the future
although the trend had yet to be consolidated.
The minutes showed most policymakers did not see domestic
growth putting pressure on prices and expected inflation would
keep on a downward path toward 3 percent in 2013.
"Some members signaled that if a cut is decided, it should
be communicated as a one-off correction which fully reflects the
gains in the battle against inflation and not as the start of a
cycle of relaxing monetary policy," the minutes said.
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.
In a worrying sign, the HSBC's Mexico Purchasing Managers'
Index showed manufacturing growth eased last month as export
orders fell for the first time in more than a
A separate poll carried out by the central bank showed
analysts saw the economy growing 3.55 percent in 2013, slightly
up from a 3.45 percent forecast in the last poll in December,
but down from an expected 4 percent expansion in 2012.
They lowered their expectations for inflation in 2013 to
3.67 percent, down from 3.69 percent in the previous survey,
according to the average of 32 analysts.
The central bank poll changed its methodology this month,
deepening the information on growth and inflation forecasts by
including probability distributions as well as median estimates.
Analysts saw more than a 50 percent chance that inflation
would come in between 3.6 percent and 4 percent both this year
and in 2014. The next most likely scenario for 2014 was
inflation of 3.1-3.5 percent.
A Reuters poll also on Friday showed analysts saw Mexico's
annual inflation rate cooling in January to its slowest pace in
more than a year.
The minutes showed little support for analysts' suspicions
that the rate cut hint was aimed at curbing a rise in the peso
, which hit a 10-month high on Jan. 17 as policymakers
met. Lower rates would make the currency less attractive.
Although "some" board members said foreign inflows were
putting upward pressure on the currency, another said if the
United States was moving toward slower growth, this would put
downward pressure on the peso in the medium term.