DAVOS, Switzerland (MNI) – Mexican inflation is sure to stay under
control, Bank of Mexico Governor Agustin Carstens said Friday.

Carstens. speaking on the margins of the Annual Meeting of the
World Economic Forum, said that Mexican monetary authorities are “quite
comfortable” with the current level of interest rates.

The Bank of Mexico last week kept its benchmark interest rate at
4.5%, as almost universally expected, for the 24th consecutive month,
reflecting what Carstens called “a very good performance of inflation”
in the last two years.

Although “this month we have seen a little bit of volatility” due
mainly to agricultural products, he said, “these are one-off shocks and
are really not affecting core inflation.”

“Core inflation is very near our objective” and “I feel quite
confident that inflation will be kept under control in the 3-4% range
that the bank established, and slowly converging to 3% in the medium
term,” he said.

Thus, he said, “at this stage we feel comfortable with the
[monetary policy] stance that we have.”

Still, Carstens observed, authorities will “watch very carefully
the performance of some agricultural products and developments in
international financial markets.”

“And also, we will continue evaluating the relative monetary policy
stance of Mexico versus other countries,” the central bank chief added.
“We are always very vigilant about inflation, but we’ve had a very good
performance.”

The Mexican economy is benefitting from strong domestic spending,
with consumption “behaving well” and investment “in the process of
improving,” he said. Lending is “going quite well” and risks are mostly
in the export sector “as we have a very close link with the U.S.,” he
said.

The U.S. will probably show positive but below-potential growth
this year and “Will only pick up speed in some years,” he said.

“But in any case we expect growth to be at least 3.5% this year” in
Mexico, he added.

Carstens suggested that Greece would not have to leave the Eurozone
and urged “an orderly restructuring” for the fiscally troubled country
so as to “maintain the Eurosystem intact.”

Europe will probably have negative growth this year and needs to
reinforce confidence, he said.

“I think that the measures that were taken by the ECB recently have
helped a lot the mood in the markets,” he said. “I think that those
actions are providing a window of opportunity for other more substantial
long-term measures” in terms of achieving fiscal sustainability,
implementing structural reforms and shoring up the banking system.

“What is of the essence is that this window of opportunity that was
opened by the ECB is taken advantage of,” he said. “And countries now
understand very clearly what they need to do.”

–Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@marketnews.com

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