Mexico central bank nominee sees interest rate cuts in 2019

Bloomberg

The economist tipped to be Mexican President-elect Andres Manuel Lopez Obrador’s first central bank board nominee said he expects policy makers to cut the key interest rate starting next year given the outlook for slowing inflation and growth.
Policy makers have room to ease even as the Federal Reserve tightens, Jonathan Heath, a former chief economist at HSBC Holdings Plc in Mexico, said in an interview. Such a move would represent an about-turn from the previous three-year period, when the central bank more than doubled the key rate to a nine-year high. “Next year we’re likely to be in a period where the economy is going to decelerate, and, at the same time, we will have inflation going down,” Heath said. “I believe that in the appropriate moment next year they will begin to reduce rates, though perhaps cautiously.”
Banco de Mexico’s key rate is 5.5 percentage points higher than the Fed, down from the 6 points earlier this year that was the most since 2009. “Banxico has sufficient maneuvering room to reduce by 1 to 1.5 points the differential with the Fed,” Heath said.
The central bank held its key rate at 7.75 percent at its meeting, saying that it will take necessary actions to meet its price target while monitoring a transitory inflation spike.