Economy

Mexico president backs cenbank hikes over inflation, but slams board member

Last week Banxico raised its key interest rate by 25 basis points to 4.5% and expects more hikes

Mexico's President Andres Manuel Lopez Obrador looks on during a commemoration on the third anniversary of his presidential election victory at National Palace in Mexico City, Mexico July 1, 2021. REUTERS/Edgard Garrido
  • Inflation in July stood at 5.81%, well above Banxico’s target of 3%;
  • Mexico’s economy slumped 8.5% in 2020, hit by the coronavirus pandemic.

Mexican President Andres Manuel Lopez Obrador on Wednesday backed the central bank’s recent moves to raise interest rates, but took a swipe at a board member for criticizing his plan to allocate International Monetary Fund resources to pay off debt.

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“I respect that decision they’re taking because inflation must be kept under control,” he told a regular news conference. “This should be something that matters to all of us.”

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Inflation in July stood at 5.81%, well above the bank’s target of 3%, and the bank last week raised its key interest rate by 25 basis points to 4.5%. More rate increases are expected this year.

Lopez Obrador said the bank should be attentive to both inflation and growth, saying: “For a long time, they’ve only dealt with inflation, they don’t look at growth, but that’s an outside point of view.”

Mexico‘s economy slumped 8.5% in 2020, hit by the coronavirus pandemic, and the government expects it to grow around 5% to 6% this year.

Lopez Obrador also took aim at deputy central bank governor Gerardo Esquivel for criticizing his proposal that the Bank of Mexico use money disbursed by the IMF to pay off public debt in order to save interest.

Esquivel, a left-leaning economist whom the president had initially tapped as deputy finance minister before he nominated him to the bank’s board, had said it was unfeasible by law.

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“I am seeing Gerardo Esquivel, who has already become a technocrat, saying you can’t do what the president is proposing. You can’t because you don’t want to, because with all due respect, they are very square,” said Lopez Obrador.

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