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 Business News | April 2006 
Mexico, Brazil Have Room to Cut Rates, Carstens Says
 Bloomberg
| | Mexican annual inflation is running at 3.4 percent, within the central bank's target range of 2 percent to 4 percent. |
Central bankers in Mexico and Brazil, Latin America's two largest economies, have room to further cut interest rates even as the world's major developed nations raise their cost of credit, International Monetary Fund Deputy Managing Director Agustin Carstens said.
"As long as inflation expectations decline and in line with the targets, interest rates will continue to fall because in both countries real rates remain very high," Carstens, a Mexican national, said in an interview yesterday in Washington.
Central bankers in Brazil on April 19 cut the benchmark rate for a seventh time since September, bringing it down 4 percentage points to 15.75 percent. Analysts are divided over whether Mexican policy makers today will cut the nation's overnight rate target for a ninth month to 7 percent from 7.25 percent.
Twelve of 21 economists surveyed by Bloomberg expect Banco de Mexico to leave the overnight rate unchanged, while nine forecast a reduction.
Manuel Medina-Mora, who runs New York-based Citigroup's Latin American operations from Mexico City, last month said the bank may start lifting rates by yearend to prevent the peso from weakening after eight straight cuts.
"There's a limit to the downward movement in interest rates in Mexico," Medina-Mora, who is also chief executive officer of Citigroup's Grupo Financiero Banamex SA unit in Mexico, said March 23. "Short-term interest rates might come down even more in the next few months, but then they will start going up."
Mexican annual inflation is running at 3.4 percent, within the central bank's target range of 2 percent to 4 percent. In Brazil, consumer prices rose 5.3 percent in the 12 months through March. The government's target for this year is 4.5 percent. |
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