Mexico's Carstens: Comfortable With Current Monetary Policy ~ strong fundamentals of the Mexican economy should help the currency "revalue" again

September 15, 2011

http://articlesofinterest-kelley.blogspot.com/2011/09/mexicos-carstens-comfortable-with.html

Mexico's Carstens: Comfortable With Current Monetary Policy

NEW YORK (Dow Jones)--Bank Of Mexico is comfortable with its current 2011 forecast and the "balance of risks" in Mexico still calls for "neutral" monetary policy, the central bank's governor, Agustin Carstens, said Thursday.

Mexico's Latin American counterpart, Brazil, recently cut interest rates, but Carstens comments suggested Mexico may not be there as yet. The bank is quite "comfortable" with its current monetary policy stance, he said, speaking at the Bloomberg Markets 50 conference. Mexico has been holding rates steady.

"The balance of risks in Mexico still calls for a relatively neutral monetary policy," he said. If the country's monetary policy is involuntarily tightened by a loosening of monetary policy in the U.S., or if the central bank sees much lower growth in the world economy, that would give the bank room to adjust, he said.

The economy is still showing resilience and exports are growing, he said, noting that 2012 economic growth could be a little higher than the government's estimate of 3.5% growth for next year. The central bank's 2011 growth forecast is for a 3.8% to 4.8% growth rate.

Carstens said the central bank feels that gold can add to the "resiliency" of its reserves, particularly in an environment of low interest rates in the developed world.

The recent depreciation of the peso does imply a temporary loosening of monetary conditions in Mexico, he said, adding that he doesn't believe that the currency's fall is permanent. The relatively strong fundamentals of the Mexican economy should help the currency "revalue" again, he said.