Mexico’s central bank does not expect short-term inflation shocks

By Anthony Esposito

ACAPULCO (Reuters) – Mexico’s central bank does not expect significant shocks to inflation in the short term, the bank’s governor said on Friday, unlike 2017 when fuel price hikes and U.S. politics helped drive consumer price rises to a 16-1/2 year high.

New central bank governor Alejandro Diaz de Leon justified a hawkish stance to interest rates, however, by saying he could not rule out such shocks.

Under his watch, which began in December 2017, the bank’s governing board has hiked the key interest rate to 7.50 percent, its highest since February 2009.

That was “a little above” the neutral interest rate level, Diaz de Leon told Reuters in an interview on the sidelines of the Mexican banking association’s annual convention in the seaside resort of Acapulco.

The bank sees inflation falling and moving toward the central bank’s 3 percent target over the course of the year, reaching that level during the first quarter of 2019.

“The downward trajectory is gradual, but this obviously depends on not facing shocks that could have a transitory and significant impact on inflation,” said Diaz de Leon.

“We are not anticipating this, but it is a possibility.”

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