| | |  Business News | January 2009 
Mexico Central Bank Expects Economy to Contract
 Ken Parks - Wall Street Journal
go to original
 |  | The central bank cut its benchmark interest rate for the first time since early 2006 on Jan. 16, lowering the overnight rate to 7.75% from 8.25% to boost a sputtering economy even though inflation remains well above its 3% target. |  | | |
Mexico City - Bank of Mexico Gov. Guillermo Ortiz said Tuesday the central bank expects the economy to contract between 0.8% and 1.8% this year due to a recession in the U.S., after growing an estimated 1.5% in 2008.
The central bank had previously forecast economic growth of 0.5%-1.5% for 2009. However, it now expects the economy to shrink this year with the U.S., the buyer of 80% of Mexico's exports, stuck in a recession. Mr. Ortiz also said the central bank expects gross domestic product contracted 1% in the fourth quarter of 2008.
The Bank of Mexico's 2009 forecast is more pessimistic than that of the Finance Ministry, which earlier this month said it expects the economy to be flat this year.
The central bank cut its benchmark interest rate for the first time since early 2006 on Jan. 16, lowering the overnight rate to 7.75% from 8.25% to boost a sputtering economy even though inflation remains well above its 3% target.
Speaking at a press conference to discuss the Bank of Mexico's fourth-quarter inflation report, Mr. Ortiz also raised the central bank's inflation outlook for the first and second quarters, but reiterated that inflation measured by the consumer price index would end the year below 4% and approach its target toward the end of 2010.
The Bank of Mexico now sees an increase in annual CPI between 5.75% and 6.25% during the first quarter, up from its previous forecast of 5.25%-5.75%, while annual CPI in the second quarter is now expected to increase an average of 5.25% to 5.75%, up from 4.5% to 5%.
The annual inflation rate fell to 6.36% during the first two weeks of January, from the eight-year high of 6.53% in 2008, thanks to lower prices for fresh produce and energy.
However, the closely watched core index, which excludes the cost of energy and fresh fruit and vegetables, rose to an annual rate of 5.77% from 5.73% at the end of December.
The central bank said in its monetary policy statement Jan. 16 that December was likely the high point for inflation, and that the government's decision earlier this month to freeze gasoline prices and reduce electricity and propane gas prices for the rest of the year will help lower inflation.
The bank also said the amount of money migrants in the U.S. sent home fell 3.6% in 2008, the first drop on record, according to the Associated Press. |
|
| |
Vallarta Weddings
Tell a Friend
Site Map
Print this Page
Email Us