Mexico central bank seen holding interest rate steady

MEXICO CITY Fri Dec 6, 2013 
reuters.com

 

MEXICO CITY Dec 6 (Reuters) - Mexico's central bank is expected to hold its benchmark interest rate steady on Friday amid signs of a recovery from a downturn in Latin America's No. 2 economy.
All 17 analysts surveyed last week by Reuters expect the central bank to hold its main interest rate at a record low of 3.50 percent.

The central bank lowered borrowing costs in September and October after an economic contraction in the second quarter but policymakers said they were done cutting rates as the economy recovered in the third quarter.

Since their last meeting, the economy has shown mixed signals, with stronger exports countered by flagging consumer confidence, and policymakers will likely point to persistent risks to growth that justify low interest rates for some time.

Meanwhile, annual inflation picked up in early November to 3.51 percent on a seasonal spike in electricity costs, but tame core price pressures give policymakers plenty of room to leave borrowing costs steady.

The median of analysts polled by Citigroup unit Banamex expect the economy to grow 1.3 percent this year, a sharp slowdown from the 3.8 percent rate seen in 2012. The economy is seen picking up next year to grow nearly 3.5 percent, according to the Banamex poll released on Thursday.

While the median estimate of the Banamex poll suggests the central bank will not raise interest rates until March 2015, bets in the interest rate swap market point to higher rates sometime after the first half of next year..

Data last week showed Mexican factory exports rose in October in a sign of strengthening U.S. demand, while a report this week showed factory sentiment rose to an eight-month high in November.

Mexican consumer confidence fell in November for the third month in a row, to its lowest in nearly two years, suggesting that the economy is unlikely to see demand-side pressure push up inflation any time soon.