February 27, 2013 / 6:56 PM / 5 years ago

UPDATE 1-Mexico central bank's Sanchez says "no case" for rate cut-report

MEXICO CITY, Feb 27 (Reuters) - Mexico central bank policymaker Manuel Sanchez sees “no case” for an interest rate cut, he told Bloomberg on Wednesday, driving up the peso as traders cut bets on lower rates ahead.

“At this moment in time I don’t see a case for a rate cut,” Sanchez was quoted as saying. Sanchez is seen as the board member with the toughest stance against inflation.

“I would like to see a better behavior of inflation. The rigidity that inflation expectations have maintained for many, many years away from the target, above the target obviously, and this stubbornness worries me,” he said.

Still, Sanchez said it was not a “prerequisite” to reach a consensus among board members before the Banco de Mexico makes a decision, Bloomberg reported. The central bank said in January it might cut interest rates from the current 4.5 percent if inflation and growth moved lower.

The peso regained ground lost earlier in the week as traders cut back expectations for a rate cut at the central bank’s March meeting, hitting a session high of 12.7827 per dollar.

Interest rate swaps now show a 40 percent chance of an interest rate cut on March 8, down from a 50-50 chance earlier. A cut of at least 25 basis points is fully priced in for June.

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