Mexican president picks Borja to replace central bank hawk - Metro US

Mexican president picks Borja to replace central bank hawk

FILE PHOTO: The logo of Mexico's Central Bank (Banco de Mexico) is seen at its building in downtown Mexico City

By Anthony Esposito

MEXICO CITY (Reuters) -Mexican finance ministry official Galia Borja is poised to become the central bank’s new deputy governor after the president nominated her on Monday to replace one of the most hawkish members on the monetary authority’s board.

Borja, who currently serves as treasurer of the finance ministry, is seen as a close ally of Finance Minister Arturo Herrera and previously worked for President Andres Manuel Lopez Obrador when he was mayor of Mexico City.

While not much is known about Borja’s position on monetary policy, some analysts believe she will be more dovish than outgoing Javier Guzman, whom she will replace.

Guzman is known as one of the more hawkish members on the central bank board who took a more cautious approach to cutting its main lending rate.

Still, under the stewardship of Bank of Mexico Governor Alejandro Diaz de Leon a big shift in monetary policy bias for Banxico, as the bank is known, is not expected in the short run.

“Banxico’s inflation target objective is clear and the Board will continue to monitor Mexico’s stubborn inflation dynamics, medium-term risks and evolution of domestic financial markets,” Joan Domene, Mexico economist for Oxford Economics, said in emailed comments.

“Thus, her arrival is unlikely to cause a substantially dovish turn,” added Domene.

For Marco Oviedo, chief economist for Mexico at Barclays, as long as Diaz de Leon is there Banxico will “proceed with caution, so no major changes in the short run.”

If Borja is approved by the Senate to an eight-year term, it would give the three picks so far by Lopez Obrador a majority on the bank’s five-member governing body.

Lopez Obrador on Monday also nominated his former campaign chief, Tatiana Clouthier, to replace Graciela Marquez as economy minister, a change that could give new impetus to his efforts to repair bruised ties with business.

Last month, Banxico hawks appeared dominant as they defied expectations and held borrowing costs steady for the first time in nearly 1-1/2 years.

The next monetary policy meeting is due on Dec. 17, but it is unlikely that Borja will be confirmed to her post by then.

Some analysts believe the fact that she could replace Guzman has the potential to boost the bank’s willingness to lower rates.

Borja could “tilt the balance of views away from the recent conservative majority towards a more neutral/dovish balance,” Goldman Sachs wrote in a note.

Banxico has a constitutional mandate to ensure the “purchasing power stability” of Mexico’s peso currency.

By choosing Borja, Lopez Obrador is making good on a pledge to pick a woman for the monetary authority’s board. Irene Espinosa is currently Banxico’s only female board member.

Given the strength of Lopez Obrador’s Morena party and its allies in the Senate, her nomination is expected to be approved.

(Reporting by David Alire Garcia and Anthony Esposito in Mexico CityEditing by Dave Graham Matthew Lewis)

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