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​Mexican financial group urges guarded talk of economy

MEXICO CITY
2018-09-21 15:06

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Mexican financial group Citibanamex on Thursday called for more guarded discussions of Mexico's economic indicators, warning pessimism could have negative consequences for the economy.

This was all the more important as Mexico prepares to usher in a new presidential term at the end of the year, the group's financial analysts said.

"Uncertainty is higher during government transition periods," analysts Sergio Kurczyn and Luis Valdez said, "Words and analysis that are not precise could lead to greater pessimism."

The statement appears to be a thinly veiled rebuke of Mexico's president-elect Andres Manuel Lopez Obrador, who ruffled some in the business community Sunday by saying the country has been bankrupt by three decades of neoliberal policies.

However, Lopez Obrador, who is to take office on Dec. 1, tempered his statement by adding that an economic crisis in Mexico would only come as a result of external turbulence or poor monetary policy management by Mexico's central bank Banxico.
In response, Citibanamex said inflation depends not only on monetary policy but also on the actions of the federal government, which manages the prices of some goods, such as fuel.

The group also said Mexico's level of public debt is acceptable, according to international credit rating agencies and debt market interest rates.

"Taking into account that there is little wiggle room in public finances for additional spending or for Banxico to make a mistake or for inflation to go above the upper range of Banxico's 2 to 4 percent target, it is better to be precise and careful," said Citibanamex.

Otherwise, there is a risk of generating unnecessary concern over inflation rates and public debt, which can in turn increase inflation and raise rates, said the group.
The Mexican economy, the second largest in Latin America after Brazil, is growing at a rate of 2 percent.

According to recent data, Mexico's inflation rate is at 4.9 percent, meaning it is above Banxico's target.

In order to maintain inflationary pressure, Banxico has repeatedly raised the interest rate since 2015. It is currently at 7.75 percent, up from its original 3 percent.
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