Morning Chronicle - Mexico president apologizes for revealing central bank rate hike

London -

IN THE NEWS

Mexico president apologizes for revealing central bank rate hike
Mexico president apologizes for revealing central bank rate hike

Mexico president apologizes for revealing central bank rate hike

Mexican President Andres Manuel Lopez Obrador apologized Thursday after he surprised financial markets by revealing that the nation's autonomous central bank had decided to hike interest rates, hours before an official announcement.

Text size:

"The Bank of Mexico raised the interest rate by 0.5 (percentage points). We're going to have an interest rate of 6.5 percent," Lopez Obrador said at his daily news conference.

The decision "was made unanimously by the Bank of Mexico (board of governors) and we respect its autonomy," he said, without revealing how he obtained the information.

The move, later confirmed by the central bank, is Mexico's seventh consecutive interest rate rise to tackle inflation that has hit a 20-year high above seven percent.

Addressing a banking conference later in the day, Lopez Obrador offered "an apology to the governor of the Bank of Mexico and the deputy governors," saying he had been informed of the decision the previous night and thought it had been made public.

He reiterated his "commitment to respect the autonomy of the Bank of Mexico," prompting applause from the audience.

Lopez Obrador's comments had drawn criticism from financial market analysts because they preceded the bank's own announcement by several hours.

"Never before has a monetary policy decision been leaked in Mexico," tweeted Gabriela Siller, head of economic analysis for the financial group BASE.

"That it is the president who does it raises concerns about the autonomy of the central bank," she added.

Capital Economics analyst Nikhil Sanghani called Lopez Obrador's comments "another worrying example of him chipping away at Mexico's key institutions."

The central bank's autonomy did not appear to face a major threat for now, he wrote in a note to clients.

"But such cavalier comments by the president, coming alongside his interventionist plans (especially in the energy sector), suggest that the poor investment climate in Mexico is unlikely to improve anytime soon," Sanghani added.

Mexico's monetary policy decisions are taken at meetings of the central bank's board of governors, made up of governor Victoria Rodriguez, who was nominated by Lopez Obrador, and her four deputies.

The sessions are usually also attended by a representative of the finance ministry.

Mexico's central bank law states that those who attend the meetings must keep the matters discussed confidential, unless they are otherwise authorized by the board.

With inflation in Mexico now more than double the central bank's target of around 3.0 percent, Capital Economics predicted four more interest rate rises of 0.5 percentage points, to 8.50 percent.

A.D.Eastaughffe--MC-UK