Mexico January inflation cools less than expected from 16-1/2 year high

02/08/2018 Reuters

The Bank of Mexico logo is seen on the facade of an office building in downtown Mexico City
The Bank of Mexico logo is seen on the facade of an office building in downtown Mexico City, Mexico, June 22, 2017. REUTERS/Edgard Garrido

Mexican consumer prices cooled less than expected in January from a recent 16-1/2 year high, data showed Thursday, backing bets that the central bank will hike interest rates to contain worries inflation may not fade as forecast.

Consumer prices rose 5.55 percent MXCPIA=ECI in the year through January, the national statistics agency said. That was down from 6.77 percent in December, but above expectations of 5.51 percent in a Reuters poll.

The lower inflation reading is largely due to a statistical adjustment a year after Mexico raised fuel prices, and analysts still expect the Banco de Mexico to raise its benchmark interest rate by 25 basis points to 7.50 percent later on Thursday.

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Mexico cenbank seen hiking rates to contain inflation worries

02/08/2018 Reuters

pesomexicanoMexico’s central bank is expected to raise interest rates on Thursday to a nine-year high in order to contain worries that inflation may not cool as quickly as forecast.

Banco de Mexico is expected to hike its key rate by 25 basis points to 7.50 percent, the highest since February 2009, according to 17 of 20 analysts polled by Reuters last week. Three predicted the bank would hold steady.

New Governor Alejandro Diaz de Leon led a quarter-point hike in December, when the bank said it would act again, if needed, to contain inflation expectations. An erosion in the outlook since then was expected to drive another hike.

While the central bank has said it expects inflation to ease back toward its 3 percent target by the end of the year, analysts are skeptical.

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Mexico’s Carstens Urges Next President to Keep CPI Mandate

11/27/2017 Bloomberg

Outgoing Mexican central bank Governor Agustin Carstens warned Mexico’s next president that it would be very difficult and counterproductive to try to change Banco de Mexico’s exclusive inflation mandate.

Latin America’s second-largest economy will elect a new president in July 2018. After more than three decades of free-market technocrats, Mexicans could pick a leader who has threatened to implement changes to Mexico’s economic model, and could seek to give the central bank additional mandates such as employment or growth. Current front-runner and leftist firebrand Andres Manuel Lopez Obrador has recently acknowledged the importance of the central bank’s autonomy in helping to tame inflation.

In an interview with Bloomberg, Carstens said he’s confident that all of the presidential candidates will respect the central bank’s independence.

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Mexico’s Peso Problems Are a Warning Sign for Global Investors

12/8/16 Bloomberg Markets

pesomexicanoThe world has never been so invested in Mexico, and so Mexico has never posed a bigger potential threat to the world. With a little more than six weeks before Donald Trump takes over with an agenda that could batter Latin America’s second-largest economy, Mexico is already showing signs of strain. Inflation is bouncing back, and traders bet it will only get worse; the peso has plummeted to record lows, and top analysts predict more pain; the government has lowered its growth forecast for four straight years, and Mexico is on the verge of a credit-rating cut just as Agustin Carstens gears up to leave the central bank after seven years at the helm.

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A Victim of Trump (and Fundamentals), the Peso Falls

11/14/2016 Forbes.com, Mexico Institute Blog

By Viridiana Rios, Global Fellow, Mexico Institute

pesoI write today as a middle class Mexican whose savings lost 10 percent of their value when American voters elected a leader who pledged to renegotiate NAFTA and tax us to pay for a wall. As a result of the election and other factors, the Mexican peso has overtaken the Argentine peso and the South African Rand to become the emerging markets 2016 worst performer.

The Mexican Peso was a barometer for the presidential campaign. It lost 10 percent of its value when Clinton lost, 1.9 percent in the week after the FBI reignited Clinton’s email controversy, and hit its historical low in the days following the election as speculation turned to the potential impact of Trump’s first months in office. The peso spiked 1.3 percent in less than an hour during the first presidential debate, and when Trump’s lewd conversation about women broke, it gained 2.2 percent.

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Mexico GDP Beats Forecasts on Consumer Spending; Peso Rises

4/29/16 Bloomberg Business

pesoMexico’s economy expanded more than analysts forecast for the third time in four quarters as strength in domestic consumption offset weak exports and a drop in oil output. The peso extended its gain, rallying to the strongest level in more than four months.

Gross domestic product rose 2.7 percent in the first quarter from a year earlier, according to preliminary figures released by the national statistics institute Friday. That compared with the 2.4 percent median forecast of 19 economists surveyed by Bloomberg. From the previous quarter, GDP expanded 0.8 percent. The institute will release final GDP figures May 20.

Mexican consumers are spending more as inflation holds near a record low and remittances rise amid weakness in the peso. The country has been a bright spot for growth compared with some Latin American economies such as Brazil, and in an interview last week, central bank Governor Agustin Carstens said it may get even better as factors that have held back the expansion, such as weak exports, begin supporting growth.

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OHL Mexico Fined Over Accounting Practices

3/29/16 The Wall Street Journal 

MEXICO CITY—Mexico’s financial watchdog slapped close to $3.5 million in fines on toll-road operator OHL Mexico SAB and two of its units over accounting practices that boosted its income and asset valuations.

OHL Mexico, a unit of Spain’s Obrascón Huarte Lain SA, said in a news release Monday that Mexico’s Banking and Securities Commission also ordered it to submit a restatement proposal as part of its probe into the company’s alleged accounting irregularities.

The investigation focused on OHL’s claim that its contract with the State of Mexico for a major toll road it operates outside Mexico City allows the company to earn a guaranteed 10% annual profit above inflation via toll increases and other measures.

OHL has said the state is liable for the guaranteed profit even if OHL doesn’t recover those funds during the life of the contract, an interpretation that Mexico’s financial watchdog disputes.

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