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UPDATE 1-Mexico central bank rate hike warning reflects majority view
December 14, 2012 / 4:20 PM / 5 years ago

UPDATE 1-Mexico central bank rate hike warning reflects majority view

* Minutes show members see need for vigilance on inflation

* All policymakers see upside risk to inflation in short term

MEXICO CITY, Dec 14 (Reuters) - A warning by Mexico’s central bank that it might raise interest rates if inflation pressures heighten again reflects only a majority view on the five-member board, minutes of policymakers’ discussion showed on Friday.

All five members of the Banco de Mexico’s monetary policy board agreed that the bank needed to remain vigilant on inflation, after deciding unanimously to keep interest rates steady at 4.5 percent at their meeting two weeks ago.

“The majority stressed that despite the recent decline in inflation, the board must be careful to avoid risks of contamination of prices and, if the downward trend does not continue, it would be prudent to adjust the monetary stance to ensure this convergence,” the minutes said.

The division backs traders’ and analysts’ view that the central bank is unlikely to raise interest rates until mid-2014, also given increasing concern about risks to growth.

“There’s really no reason to keep this neutral to hawkish tone, that line ‘if inflation picks up, we will hike’, that has less punch for me,” said Benito Berber, an economist at Nomura in New York.

Inflation in Latin America’s no. 2 economy has been easing since it touched a 2-1/2 year high of 4.77 percent in September, after an outbreak of avian flu and bad weather pushed up the price of eggs, chickens, and crops earlier this year.

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