| | |  Business News | August 2008 
Mexico Inflationary Pressures Are Easing, Ortiz Says
 Thomas Black - Bloomberg
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| | Guillermo Ortiz, Governor of the Central Bank of Mexico (AFP/Getty) | | |
Inflationary pressures in Mexico are abating and consumer price increases will peak by next year, central bank Governor Guillermo Ortiz said.
"We're seeing the end of the inflation theme and pressures because of supply shocks," Ortiz said today at a conference in Monterrey. Wages haven't been affected by inflation, and a slowing economy will help keep prices from accelerating, he said.
Ortiz's statement and Economy Minister Gerardo Ruiz Mateos' comment earlier this week that inflation may have peaked signal confidence that the bank's three rate increases in as many months have helped tame the fastest inflation in almost four years.
"The combination of moderate economic activity going forward and lower raw material prices, and the fact that there hasn't been significant contamination in the formation of prices and salaries, make us think that the inflation forecast by the Banco de Mexico will be reached," Ortiz said today.
Mexico's peso weakened after Ortiz's comments, dropping 0.9 percent, the most in almost three weeks, to 10.2336 per dollar at 3:28 p.m. New York time. The currency had gained 7.4 percent this year through yesterday on the widening gap between benchmark lending rates in the U.S. and Mexico.
The Banco de Mexico, like central banks in most countries, has struggled to keep inflation in check amid steeper costs for energy, food and commodities. The bank targets annual inflation of 3 percent, a goal it doesn't expect to reach until 2010.
Economic Outlook
The annual inflation rate accelerated to 5.53 percent in the first half of August, according to data compiled by Bloomberg. July's annual rate of 5.39 percent was the highest level since November 2004.
Ortiz said today that Mexico will have a low growth rate next year. His comment comes after the bank signaled earlier this month that easing commodity prices and slower economic growth may reduce the need for further rate tightening. Banco de Mexico said in a statement Aug. 15 that the risks of an economic slowdown have increased, and that food and energy prices may ease soon.
Finance Minister Agustin Carstens said today that a global credit crunch and the resulting economic slowdown reduced Mexico's gross domestic product growth by 1.5-to-2 percentage points.
"We're seeing a transitory period of a deceleration of the economy," Carstens said in Monterrey. "During next year our economy will begin to accelerate with much more vigor."
Carstens predicted economic expansion of 4 percent by the fourth quarter of next year, up from 2.8 percent in this year's second quarter. Growth may reach more than 5 percent in 2011 and 2012, he said.
To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack(at)bloomberg.net. |
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