CORRECTED-UPDATE 1-Mexico faces heightened inflation risk - cenbank board member

viernes 26 de septiembre de 2014 17:56 GYT
 

(Corrects to remove reference to lawmakers raising the minimum wage in first paragraph)

Sept 26 (Reuters) - Mexico's inflation outlook has worsened after a spike in fresh food prices and the chance that a minimum wage hike may be approved by authorities, Mexican central bank Deputy Governor Manuel Sanchez said on Friday.

Sanchez said in a speech in New York that inflation would likely remain above 4 percent during this year and that a wage hike could end up spurring broader price pressures, according to an emailed copy of his speech.

"Significant minimum wage hikes may contaminate the process of price formation. These adjustments could trigger a chain reaction on inflation expectations," and make it harder to reach the central bank's 3 percent target, Sanchez said.

Data this week showed Mexican annual inflation remained above the central bank's tolerance ceiling in early September at 4.21 percent. Policymakers have said they expect inflation to cool back near 3 percent in the first half of 2015.

Mexico's central bank cut its benchmark rate to 3 percent in June and has held steady since then, arguing that a sluggish economy would contain price pressures through next year.

Sanchez, who is seen as the board member most worried about inflation, also said there were risks of further agricultural price shocks as well as the possibility that a bout of volatility in global financial markets could weaken the peso enough to where it drives up import prices and hurts inflation.

Mexico's peso slumped to an eight-month low on Friday after strong U.S. second quarter growth data backed bets the U.S. Fed could raise interest rates next year.

The peso has shed nearly 5 percent from a June high amid expectations that higher U.S. interest rates will push investors to dump emerging market debt, which is seen as riskier, in favor of dollar-denominated assets. (Reporting by Michael O'Boyle)