Mexico: Banxico leaves rates unchanged
January 20, 2012
At its 20 January meeting, the Central Bank (Banxico) left the monetary policy rate unchanged at 4.50%. The decision was widely expected by the market amid the recent surge in inflation and heightened volatility in the foreign exchange market. Banxico attributes the recent surge in inflation to the depreciation of the exchange rate, and therefore expects it to be transitory. In the same vein, monetary authorities stressed that core inflation remains close to the Bank's permanent inflation target of 3%, and that the exchange rate pass-through to prices has been moderate, in line with developments seen over the last 10 years or more. Finally, although the Bank maintained an overall dovish stance, it warned about possible upside risks to inflation stemming from heightened volatility in financial markets and a rise in agricultural prices. The next monetary policy meeting is scheduled for 16 March.