May 31, 2018 / 3:43 PM / a year ago

UPDATE 1-Mexico central bank board says shock risks justify prudent stance-minutes

(Recasts with details from minutes)

MEXICO CITY, May 31 (Reuters) - Mexico’s central bank board unanimously thought “prudent” monetary policy was needed in the face of potential economic shocks that could drive up inflation, minutes from their May 17 meeting released on Thursday showed.

At the May meeting, the Banco de Mexico’s governing board unanimously voted to keep the key rate steady at a nine-year high of 7.50 percent for a second meeting in a row after a string of hikes.

Most members said Mexico’s peso could be pressured by a broadly stronger dollar, uncertainty around trade talks with the United States and Canada, and Mexico’s July 1 presidential and congressional elections, minutes showed.

“All members agreed that it is necessary to continue implementing a prudent monetary policy. All members also indicated that the Mexican economy could be affected by some shocks that could generate additional inflationary pressures in the following months,” the minutes said.

One member thought another hike could be necessary in the near future.

The peso sank more than 1.4 percent on Thursday to an almost 15-month low past the psychological 20-per dollar level, leading losses among major currencies.

The peso weakened after the United States said it would put tariffs on aluminum and steel imports from Canada and Mexico, with Mexico responding that it would impose wide-ranging “equivalent” measures on farm and industrial products.

Most of Mexico’s central bank board thought there were downward risks to growth and upside risks to inflation. (Reporting by Michael O’Boyle Editing by Phil Berlowitz )

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