Mexico Central Bank Narrows Growth Forecast, Sees Tame Inflation

11/4/2015 Bloomberg

mexican pesosMexico’s central bank narrowed its 2015 growth forecast, saying improvement is being limited by stalled exports and weak industrial output, and that inflation will remain near policy makers’ target for two years.

Gross domestic product will increase 1.9 percent to 2.4 percent this year, compared with the previous forecast of 1.7 percent to 2.5 percent, the central bank said in its quarterly inflation report published Wednesdayon its website. Growth will then probably accelerate over the next two years, policy makers said.

While most economists surveyed by Bloomberg expect Mexico to raise interest rates in December following an expected increase by the Federal Reserve, Governor Agustin Carstens said a U.S. move doesn’t necessarily require Mexico to follow suit, given current economic conditions. The peso’s tumble to a record low has shown few signs of spurring inflation, though Carstens emphasized that the bank is watching for signs of pass-through to consumer prices.

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Mexicans’ Drive to Shop Fuels Liverpool Sales in Weak Economy

9/3/2015 Bloomberg

woman with shopping bags and credit cardEl Puerto de Liverpool SAB, Mexico’s biggest department store, survived last month’s stock meltdown to return to near-record levels, showing further evidence that retail sales and consumer credit are the bright spots in a sluggish economy.

The company, named after the Port of Liverpool when it imported merchandise from the English city in the 19th century, had the fourth-biggest stock gain in the country’s benchmark index this year, after beating analysts’ sales estimates for four straight quarters.

With the 33 percent share increase so far in 2015, Liverpool trades at 31.5 times earnings, close to the average among its peers, data compiled by Bloomberg show. Still, the rise may not be sustainable, according to Signum Research analyst Cristina Morales. The weaker peso means imported products are getting more expensive and it may force Liverpool to raise its prices, driving some consumers away, said Morales, who recommends holding the stock.

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How Challenging Carlos Slim Is Helping Mexico Tame Inflation (And Why It May Not Last)

8/20/15 Bloomberg Business

Via Bloomberg Business
Via Bloomberg Business

Across Latin America the drop in commodity prices has sent currencies tumbling, spurring faster inflation. Everywhere, that is, except for Mexico. Mexican consumer prices rose 2.74 percent in July from the year earlier, the slowest pace in almost half a century and less than any other major economy in the region.

The last time inflation was this slow in Mexico was 1968, when the Vietnam War was at its height, the Beatles were in the charts with “Hey Jude” and the Soviet leadership was preparing to crush the Prague Spring.

So what makes Mexico different than its Latin American counterparts? Part of the answer lies with billionaire Carlos Slim. An overhaul of Mexico’s telecommunications industry has increased competition for Slim’s America Movil SAB and eliminated domestic long-distance charges for all carriers, slashing communication costs by 12.5 percent in the past year. That’s far more than in any other country in the four-member Pacific Alliance that also includes Colombia, Chile and Peru.

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A Mexican Standoff: Banxico vs. The Fed

8/6/15 Forbes
5504964078_df874cacb5_zBanxico, the Mexican central bank, is widely expected to raise interest rates alongside the Federal Reserve in the upcoming hiking cycle to avoid further weakness in the Peso (MXN).  There was even speculation that Banxico would preemptively hike during last week’s policy meeting. Policymakers ended up keep rates unchanged at an all-time low of 3.0%, but the central bank did take steps to buoy MXN.

The central bank increased the amount of dollars to be auctioned daily from $52 million to $200 million. They also reduced the amount MXN has to weaken for the central bank to sell an additional $200 million from 1.5% to 1%. MXN reacted immediately to the announcement, jumping 1.2% against USD, which is a notable move for the world’s most traded EM currency.

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UPDATE 2-Mexico inflation touches new record low in early July

7/23/15 Reuters

Data from INEGI
Data from INEGI

Mexico’s annual inflation rate cooled in early July to a record low, official data showed on Thursday, giving policymakers room to hold interest rates low until an expected increase in U.S. borrowing costs.

The national statistics institute said inflation in the 12 months through mid-July eased to 2.76 percent from 2.87 percent in June. A poll of analysts by Reuters had forecast the rate would be unchanged.

Most of Mexico’s central bankers think inflation will remain below their 3 percent target for the rest of the year because of the sluggish economy.

Despite tame inflation and weak growth, Mexico is seen raising interest rates when U.S. borrowing costs move higher.

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Bank of Mexico Held Interest Rates Steady Ahead of Budget Cuts

02/12/05 Wall Street Journal

banco de mexicoThe Bank of Mexico’s five board members voted unanimously last month to keep interest rates unchanged, a day before the government unveiled a series of budget cuts to address the drop in oil prices and expectations of more difficult financing conditions ahead.

The central bank, led by Agustin Carstens, left the overnight lending rate target at 3% for a fifth consecutive meeting Jan. 29.

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Surprise Drop in Mexican Prices Sends Inflation Rate Tumbling

1/22/15 Bloomberg 

5504964078_df874cacb5_zMexican consumer prices unexpectedly fell in the first half of January, pushing the annual inflation rate to the lowest in almost four years. Prices dropped 0.19 percent, the national statistics institute said on its website, compared with analyst forecasts that ranged from an increase of 0.09 percent to 0.49 percent. The annual inflation rate tumbled to 3.08 percent from 3.97 percent in the second half of December. Banco de Mexicotargets inflation of 3 percent, plus or minus one percentage point. Central bank Governor Agustin Carstens this month forecast inflation will be near 3 percent by the middle of the year, aided by the end of connection fees for long distance telephone calls, smaller gasoline price increases and an economy growing below potential. The peso strengthened 0.3 percent to 14.7128 per U.S. dollar at 8:07 a.m. in Mexico City.

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