Published On: Sat, Sep 17th, 2016

Mexico Central Bank alerts on weak peso’s impact on inflation

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According to Reuters, Mexico’s Central Bank (Banxico) will pay close attention to inflationary pressures stemming from the weak peso while deciding monetary policy, deputy governor Manuel Sánchez said on Thursday, September 15.

The upside risks dominated the outlook for inflation, and inflationary pressures arising from the peso’s weakness posed the biggest concern, Sánchez said in a speech published on the central bank website.

Mexico’s annual inflation rate quickened to 2.73 percent in August, its highest level since February, but remained below the central bank’s target despite the peso’s slide.

A picture illustration shows Mexican pesos and U.S. dollars banknotes in Mexico City March 10, 2015. REUTERS/Edgard Garrido

A picture illustration shows Mexican pesos and U.S. dollars banknotes in Mexico City March 10, 2015. REUTERS/Edgard Garrido

“Going forward, the implications of exchange-rate developments will remain an important input in monetary policy decisions,” Sánchez added.

He emphasized that the bank does not target a specific exchange rate and therefore will not “react” if the peso hits a certain level.

Mexico’s peso <MXN=D2> closed at a record low of 19.3635 per dollar on Thursday, having lost more than 5 percent since early July, hurt by concerns U.S. Republican Presidential hopeful Donald Trump could win after polls showed him gaining.

Trump has proposed building a wall across the U.S.-Mexico border and making Mexico pay for it, to prevent drug running and illegal immigration.

ALEXANDRA ALPER  / SIMON CAMERON-MOORE, Editing for Reuters

Source: www.reuters.com

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