Mexico central bankers worried about peso, oil risks
Central Bank board members voted 5-0 at their Jan. 29 meeting to hold their benchmark rate at a record low of 3.0 percent.
All board members were concerned that the peso could remain around current levels, at its weakest in nearly six years, for a "prolonged" period and that the slump could begin to drive up consumer prices.
Foreign investors have amassed a record 2.1 trillion pesos(\\$140 billion) of local currency debt, and two board members worried that a mass sell-off by global funds could spark a run on the peso.
A steep drop in oil prices, which hammered the peso late last year, has dampened hopes that Mexico's sweeping energy reform will help revive crude oil production, which has been declining for over a decade. Most policymakers said the drop in oil production could crimp growth, while adding that the steep drop in global oil prices would require lower government spending.
Mexico's Finance Minister Luis Videgaray, who attended the central bank board meeting, announced a nearly 3 percent cut to the 2015 budget a day after the board's interest rate announcement.
Mexico's economy is expected to have grown just above 2 percent last year and it is seen growing around 3.3 percent this year, according to a recent Banamex poll of analysts.
Data earlier this week showed Mexico's annual inflation rate cooled sharply in January to its lowest in nearly four years, backing bets that the central bank will leave interest rates at record lows in the coming months to support a sluggish economy.
Most policymakers said they expected inflation to end the year just below 3 percent amid slack domestic demand in the economy.
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