(Bloomberg) – The head of the Bank of Mexico says the Mexican peso has seen increased volatility recently due to escalating tensions in the Middle East, but there are no concerns about inflation and the bank will remain cautious in future monetary policy decisions. There was hope.
Most Read Articles on Bloomberg
The bank, often referred to as Banco Banco, does not have a currency objective, but keeps a close eye on geopolitical factors that lead to currency fluctuations, Governor Victoria Rodríguez said in an interview on Saturday. Analysts will be watching to see what tone banks will make in their May 9 decision and whether they will choose to keep borrowing costs at current levels.
“The effects that we saw in the last few days have reversed rapidly. We do not consider it to be a significant influencing factor,” he said a day after Mexico’s annual banking conference in Acapulco. Stated. “At this point, it’s not a significant risk. Of course, we’re paying close attention.”
Read more: Mexico likely to pause interest rate cuts in May, Heath says
The Mexican peso, widely considered a proxy for risky assets, suffered its biggest decline in four years following reports of escalating tensions between Israel and Iran, but later reversed much of the decline. The peso has been the best performing major currency over the past 12 months.
“We have a floating exchange rate, which acts as a variable to avoid shock transmission to the real economy,” Rodriguez said. “We always monitor exchange rates to make sure the market is operating in an orderly manner, but we haven’t seen anything relevant on that front lately.”
The central bank cut borrowing costs by a quarter of a percentage point at its last meeting and is expected to continue gradual easing throughout the year. Rodriguez reiterated in the interview that any changes would be made “gradually.”
Read more: In Latin America, dreams of low interest rates crumble and political woes emerge
Minutes released after the previous meeting show that the five-member board was divided on whether it made sense to cut the policy rate to 11%, with one member citing the strength of the domestic market and the decline in inflation. He said such measures were premature due to the height. While its Latin American peers generally eased faster than Banxico, the Banco de México kept a close eye on a tough measure of core prices excluding food and fuel.
Rodríguez said the strong peso has had some effect on curbing inflation, especially since prices are not rising as quickly as before due to the impact on importers.
The strength of the peso has become a selling point for President Andres Manuel López Obrador ahead of June’s general elections in which his ally Claudia Sheinbaum will run as his successor. Given the volatility of recent days, the president said the currency was “too strong” and some depreciation would have been beneficial.
Seven central banks, including the Bank for International Settlements and Banxico, recently announced that they will consider combining tokenized versions of central bank money and commercial bank deposits on a unified platform.
Read more: BIS and banks test tokenization of cross-border payments
Rodriguez said the project’s schedule will depend on private sector participation.
“We are working on a pilot to make cross-border payments more efficient,” she added. “The goal is to find alternatives that make payments cheaper, faster and more transparent.”
–With assistance from Robert Jameson.
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
