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Mexico central bank member eyes U-shaped economic recovery - Metro US

Mexico central bank member eyes U-shaped economic recovery

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

MEXICO CITY (Reuters) – Mexico’s economic recovery from the coronavirus pandemic is more likely to be U-shaped than V-shaped, a Mexican central bank board member said on Friday, giving a contrasting view to the predictions of President Andres Manuel Lopez Obrador.

“It’s difficult to expect a V-shaped recovery. … Rather, it could be a U-shaped recovery. That’s what I think could happen,” board member Javier Guzman said in a Mexican radio interview.

Guzman said he also did not rule out a W-shaped recovery, in the event that further coronavirus outbreaks forced businesses to once again go into lockdown.

Lopez Obrador has predicted a V-shaped recovery in Latin America’s second-largest economy, which is forecast to shrink as much as 10% or more this year.

Guzman said he expected inflation would reach the Bank of Mexico’s 3% target rate in the second half of 2021, after an increase in prices this year.

The central bank on Thursday cut its key interest rate by 50 basis points to 4.5%, its lowest level in four years, but showed signs that the pace of cuts could slow.

In a separate interview, Bank of Mexico Governor Alejandro Diaz de Leon suggested the pace of reductions might in fact ease if inflationary pressures persist.

“If the factors that have pressured inflation ease more quickly that opens space (for monetary policy), if those factors increase and continue to pressure inflation upwards there will be less space,” said Diaz de Leon.

“Clearly as you lower (rates) you naturally have less space,” said Diaz de Leon.

(Reporting by Daina Beth Solomon and Abraham Gonzalez; Additional reporting by Anthony Esposito; Editing by Dave Graham, Jonathan Oatis and Richard Chang)

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