Mexico central bank seen holding rate steady, hiking in Q3

23 Jan, 2015

MEXICO CITY: Mexico's central bank is expected to hold its benchmark interest rate steady at a record low next week despite a deep slump in the peso and amid cooling inflation, analysts surveyed by Reuters said on Friday.

All 20 analysts polled by Reuters expect the Banco de Mexico to hold its key rate at 3.00 percent on Jan. 29, after inflation slowed to 3.08 percent in early January after earlier spiking above the central bank's 4 percent ceiling.

Policymakers held borrowing costs steady last month, but flagged risks to inflation from a slump in the peso, which has weakened more than 11 percent since early September thanks to falling oil prices.

Mexican central bank governor Agustin Carstens said earlier this month that Mexico will probably have to raise interest rates this year, given the Federal Reserve's own expected hike in US borrowing costs.

The median bet of analysts polled by Reuters is for a tightening cycle to begin with a 25-basis-point hike in the third quarter and pushing borrowing costs up to 4.5 percent by the third quarter of 2016.

The central bank will issue its policy statement at 1 p.m. local time (1900 GMT) next Thursday.

Copyright Reuters, 2015

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