Mexican policy makers said inflation will end the year below the upper limit of the central bank’s target range as the impact of tax increases that boosted consumer prices in January proves short-lived.
Mexican policy makers raised their consumer price forecast for 2014 amid an improved economic outlook, estimating inflation will ease next year.
Mexico’s inflation-linked bonds fell as central bank Governor Agustin Carstens said he expects price increases to slow to target by year end.
Mexico’s peso rose from a one-week low as Federal Reserve Chairman Janet Yellen signaled a gradual reduction in a U.S. stimulus program that has supported demand for emerging-market assets.
Mexican consumer prices rose less than economists expected in January as falling farm prices softened the impact of new taxes on everything from potato chips to chocolates.
Mexico’s inflation-linked bonds sank, pushing yields to a six-month high after a report showed consumer prices in Latin America’s second-biggest economy rose less than forecast last month.
Federal Reserve Chairman Janet Yellen will give her first semi-annual report on U.S. monetary policy and the economy as head of the central bank in testimony before Congress.
Mexico’s central bank kept borrowing costs unchanged at a record low for a second straight meeting, saying economic growth is picking up and faster inflation will be transitory.
Attached is a side-by-side comparison of the Mexican Central Bank’s interest rate announcements.
Mexico’s peso volatility climbed as investors awaited monetary policy decisions this week from Banco de Mexico and the U.S. Federal Reserve.