Banco de Mexico Holds Overnight Interest Rate at 4.50%

The Banco de Mexico held its overnight interest rate target steady at 4.50%.  In an unofficial translation the Bank noted: "The current levels of inflation are the result of several factors: the declining trend in costs of labor, the fading impact of tax changes last year, the favorable exchange rate (despite the recent episode of volatility in international financial markets) and a significant reduction in agricultural prices."

The Mexican central bank also held the overnight interest rate target unchanged at 4.50% at its May meeting.  Mexico reported annual inflation of 3.28% at the end of June, compared to 3.4% April (3% in March), and 3.3% in the middle of May, and within the Bank's inflation target range of 3% +/- 1%.  The Mexican economy grew 4.6% year on year in Q1 this year, up 0.5% from the previous quarter, compared to GDP growth of 5.4% in 2010.

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