Mexico Central Bank Chief Says “Halt” On Cuts Gives Alternatives

A pause in its cycle of interest rate cuts gives policymakers choices depending on trends in inflation and that the country’s economic recovery is more closely mirroring the bank’s more optimistic forecasts, says The Bank of Mexico’s Governor.  Alejandro Diaz de Leon told Reuters in an interview , ‘this is why we made the decision to take this pause and keep the rate at its current level.” He also added that, ” We feel that it gives the central bank options depending on both incoming data on inflation and the factors that affect inflation so we can better identify what to do.”

The central bank startled financial markets by keeping its standard interest rate unchanged at 4.25%, citing the need for a “pause” to weigh inflationary pressures as it held borrowing costs steady for the first time in nearly 1-1/2 years. The monetary policy decisions were complicated by conflicting data and volatility in inflation , said Diaz de Leon.

He added “We have distinctly seen from September to now many variables that have moved in different directions and that are hard to identify,” Mexico’s economic recovery is closer in line with the two more optimistic scenarios laid out by the central bank in its last quarterly economic report and looking less like the most pessimistic of its forecasts, he added.