(Bloomberg) — Mexico’s president expressed his wish that the central bank help boost growth during an event with his new pick to lead Banxico, and just as an economic recovery falters amid tighter monetary policy.
“One job of the bank is to control inflation and the other, which we would like very much to see, but we are only giving an opinion, is that it also helps to boost growth,” President Andres Manuel Lopez Obrador, known as AMLO, said at his daily news conference on Thursday. “Inflation can be controlled but if there isn’t growth we don’t make progress.”
The Mexican peso erased almost all of the day’s gains after the comment, falling to 20.57 to the dollar, before strengthening again.
Lopez Obrador’s nomination of his little-known spending chief Victoria Rodriguez Ceja to lead Banxico has raised questions about whether he’d try and erode the bank’s coveted autonomy. But his remarks on Thursday came after Rodriguez Ceja pledged her commitment to sticking to Banxico’s inflation-targeting mandate at the same event.
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AMLO also reiterated that he recognized Banxico’s autonomy to decide on monetary policy and that “we will always respect its decisions.”
Any move to explicitly target growth could distract from grappling with inflation, but AMLO and Rodriguez’s commitments to the bank’s autonomy are “somewhat reassuring,” said Julio Ruiz, an economist at Itau BBA in Mexico City. “Something that AMLO has tried to avoid since the beginning of his administration is messing with Banxico’s autonomy directly.”
Banxico unexpectedly accelerated the pace of monetary tightening earlier this month, delivering a 50 basis-point hike to its key interest rate to fight inflation.
(Updates with market reaction, analyst comment from third paragraph.)
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