September 26, 2017 / 5:40 PM / 10 months ago

Mexico central bank seen leaving rates steady at 7 percent: Reuters poll

MEXICO CITY (Reuters) - Mexico’s central bank is expected to hold borrowing costs steady this Thursday amid signs that consumer price inflation could start to fall after reaching its highest point in 16 years and as economists shrug off the impact of a powerful earthquake.

The Banco de Mexico is seen leaving unchanged its benchmark rate at 7.00 percent on Sept. 28, according to all 21 analysts surveyed by Reuters.

The median forecast of the poll also sees the rate holding at 7.0 percent at year-end.

The central bank will announce its decision at 1 p.m. local time (GMT 1800) on Thursday.

Data due on Wednesday is expected to show that Mexico’s annual inflation rate rose to a more than an 8-1/2-year high in July, but policymakers and private analysts think the rate could soon begin to drop.

Year-on-year inflation slowed more than expected in the first half of September to 6.53 percent after rising 6.66 percent in August, its highest monthly rate since May 2001.

The Mexican government sees inflation at 5.8 percent this year and 3.0 percent next year.

“In our opinion, Banxico (the central bank) will maintain a benchmark rate without change for the rest of the year given that we estimate inflation has reached its peak for the year,” Banorte-IXE bank said in a research note.

A recovery in the Mexican peso this year has dampened concerns that currency weakness could fan inflation even higher.

Mexico’s peso has rallied back from a record low in January as U.S. President Donald Trump backed away from threats to impose big tariffs on imports from Mexico and toward a renegotiation of the North American Free Trade Agreement (NAFTA).

Private economists, however, do not expect the multiple natural disasters that have buffeted Mexico in recent weeks to prompt the bank to start lowering rates sooner, given the ongoing risks to the economy.

“We think the impact of the recent supply shocks (hurricanes and earthquakes) can be considered transitory,” CitiBanamex said in a research note.

Editing by Jonathan Oatis

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