Inflation will fall to 3% regardless of who heads Banxico: Carstens

By Elliot Bullman

The governor of the Bank of Mexico explained that by the end of 2018, inflation will be close to 3% and stressed that the rise in the minimum wage should be done prudently.

The governor of the Bank of Mexico, Agustín Carstens, guaranteed this Friday that by the end of 2018 inflation will be close to 3 percent, the goal of price stability, this regardless of who the new leader of Banxico is.

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Last Thursday, the Central Bank kept its interest rate at 7 percent. This was the third monetary policy meeting in which the rate remains unchanged, at a time when inflation is at a level of 6.37 percent, way above the Bank's target range of 3 percent +/- one percentage point .

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After participating in the National Council of the Business Coordinating Council (CCE), the governor of Banxico stressed that they are looking for better salaries, but the recommendation is that it be done with great prudence, in such a way that it becomes in itself a boost to inflation.

The outlook for the economy has been clouded by the ongoing renegotiation of the North American Free Trade Agreement (NAFTA) between the United States, Mexico and Canada.

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The Banco de Mexico has raised rates to their highest level since early 2009 to counter a spike in inflation well above the bank’s 3 percent target. Board members have stressed that it is too soon to cut rates, as consumer price inflation remains high.

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Potential inflation risks could come from a peso depreciation if NAFTA talks are unfavourable, or market reaction to the normalization of U.S. monetary policy, the bank said.

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