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Mexico deputy cenbank governor says inflation in focus on policy moves: BBG

MEXICO CITY (Reuters) - Mexico's central bank will focus on risks to inflation as well as economic growth when deciding further monetary policy moves, Deputy Governor Alejandro Diaz de Leon said on Monday.

"Our main job is to maintain inflation expectations well anchored," Diaz de Leon said in an interview with Bloomberg TV, as he noted that the central bank raised rates earlier this month to prevent a weak peso and a recent gasoline price hike from hitting inflation expectations.

"We think that the increase in rates that has been put in place through today has created a significantly orderly adjustment to significant shocks that the economy has been seeing," he said when asked if the central bank needed to do more.

Going forward, the next move by policymakers would depend on whether the U.S. Federal Reserve raises interest rates as well as "how this contamination of price formation could potentially affect the next inflation numbers and the output gap," Diaz de Leon said.

"We need to be mindful that probably the U.S. economy will accelerate its GDP growth and the contrary is expected for the Mexican economy," he said.

Mexico's gross domestic product growth is expected to slow to around 1.5 percent this year from 2.3 percent last year.

Diaz de Leon said it was difficult to answer whether the peso <MXN=> was undervalued or over-valued, noting the Mexican currency would be subject to volatility until there is more is known about U.S. trade policy under President Donald Trump, who has threatened to slap tariffs on Mexican goods.

"It will be very important for the peso to have certainty about the trade outlook going forward," he said. "We want to ensure until that information is fully determined that the price formation in the economy gets done in an orderly way."

Asked about his view on intervention in the currency market, Diaz de Leon said Mexico's policymakers have acted sparingly in moments of low liquidity.

"The goal has been to foster good liquidity," he said.

A Reuters poll of economists found Diaz de Leon was considered the most likely to replace central bank chief Agustin Carstens, who is set to leave his post at the end of June.

Diaz de Leon refused to comment on whether he would like to take over Carstens' seat. "I am the least suitable to answer that directly," he said.

(Reporting by Michael O'Boyle; Editing by Leslie Adler)

 

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