By Eliane Portillo

A group of financial analysts from leading Mexican financial institutions met on Thursday to discuss Banxico’s governing board’s first meeting on monetary policy this year.

The Central Bank of Mexico (Banxico) will likely keep its bank funding rate (the amount of money Banxico can borrow from private banks compared with its holdings) at 4.5 percent, said a panel of economic analysts. Iván Martínez Urquilo, an economics analyst at the Economic Research Services, said that, in accordance with the moderate growth figures and higher-than-expected inflation rates experienced in December, Banxico will likely send a message of neutrality by keeping its bank funding rate the same.

Martínez Urquilo noted that the increase in consumer prices in the first half of January will reflect the decrease in telecommunication taxes but, nonetheless, prices on raw materials and imported goods are still expected to rise. However, Martínez Urquilo said that these variables will likely have only a temporary effect on prices, which will gradually fall with less consumer demand.

Joel Virgen, the coordinator of Economic and Social Studies, explained that by taking into account the performance of Mexico’s economy and inflation and external markets, it is probable that the risks surrounding Mexico’s economic growth are moving toward neutrality.

However, current inflation rates show a slight deterioration in the country’s economy, he said.

In terms of monetary policy, the government could move its policies to more neutral territory, taking special care not to contribute to the possible increase in short-term interest rates due to the nature of current inflationary pressures, Virgen explained.

Virgen also said that he does not rule out the possibility that inflation risks will be modified to project a slightly negative outlook because of rising prices, particularly on agricultural products which have increased in price due to recent droughts in the country.