No Rate Cut For Mexican Peso

Mexican central bank board member Manuel Sanchez said he doesn’t see a case for the first interest-rate cut since July 2009. The peso rallied the most in three weeks and the benchmark stock index pared its gain.

“At this moment in time I don’t see a case for a rate cut,” Sanchez said today in an interview at Bloomberg’s Mexico City office. “I would like to see a better behavior of inflation. The rigidity that inflation expectations have maintained for many, many years away from the target, above the target obviously -- this stubbornness worries me.”

Sanchez, who joined the five-member bank board that votes on Mexico’s rate decisions in May 2009, said the Mexican economy is growing at its full potential, and that if this continues sooner or later demand pressures could appear. Monetary policy should “remain vigilant” to risks including agricultural shocks such as bird flu and financial weakness abroad that could crimp investment in Mexican assets and hurt the peso, he said.

The peso rallied 0.6 percent, the most in three weeks, to 12.7652 per dollar. The benchmark IPC stock index pared its gain for about two hours before rallying to close the day with a 0.7 percent advance.

Bloomberg

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