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Mexico Has No Inflation Concerns
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July 4, 2012

'We have no inflationary concerns whatsoever,' said Mexico’s Finance Minister, Jose Antonio Meade, 'the pass-through to inflation from the peso’s recent weakness has been very minor if at all.'

Mexico City, Mexico - Mexico’s Finance Minister, Jose Antonio Meade, said his government has no concerns about inflation "whatsoever” even after the pace of consumer-price increases exceeded the government’s target range in the first half of June.

Mexico’s inflation expectations are "very well-anchored" in the short, medium and long-term and core inflation is very well-behaved, the Finance Minister said in an interview today in Mexico City.

Prices jumped 4.3 percent in the 12 months through mid-June, leading economists to raise their year-end inflation forecast to 3.81 percent in a survey by the central bank published July 2nd. A month earlier analysts were forecasting inflation of 3.65 percent. The central bank targets inflation of 3 percent, plus or minus 1 percentage point.

Mexico’s economy grew 4.6 percent in the first three months from the year earlier, the fastest pace in six quarters, fueling demand that is adding to inflation pressures. A 9.5 percent tumble by the peso against the dollar in May, the worst performance among major currencies tracked by Bloomberg, is also weighing on the cost of imports.

"We have no inflationary concerns whatsoever," Meade said. The pass-through to inflation from the peso’s recent weakness "has been very minor if at all."

Meade said that he has no plan to change his 3.5 percent 2012 growth forecast at this time. While he still sees the possibility of surprises pushing growth "marginally higher" than estimated, he doesn’t see any possibility of it reaching 4.25 percent, which is the upper limit of the central bank’s forecast range from May 16th.

Antonio Meade said that investment in state-owned oil company Petroleos Mexicanos equivalent to 2 percent of gross domestic product would be a "reasonable amount" for next year’s budget.

In addition, it would be a "good signal" if Mexico moved toward a balanced budget next year from this year’s deficit of 0.4 percent of GDP, he said. The government has until December 15th to present the 2013 budget, later than the usual September 8th deadline because Enrique Pena Nieto, of the Institutional Revolutionary Party, will replace Felipe Calderon on December 1st, Antonio Meade said.

He also said that it is too early to say whether he would stay on if asked as finance minister in the upcoming administration. Sergio Luna, chief economist for Citigroup Inc.’s Banamex unit, said Meade could potentially stay on at his post.

While he didn’t rule out the possibility, the finance minister said he hadn’t spoken to Pena Nieto’s team and that his "central scenario" is that he would leave government.

Still, "at this stage it’s difficult to rule out anything," he said.