August 7, 2012 / 6:28 PM / in 6 years

Mexico's Sanchez: inflation spike temporary, no need to hike

MEXICO CITY (Reuters) - A spike in Mexican inflation above the central bank’s 4 percent limit is a “mini-bubble” and does not require higher interest rates, central bank board member Manuel Sanchez said on Tuesday.

In an interview with Reuters, Sanchez said most of the recent rise in the consumer price index was due to factors such as weather and the exchange rate, which the central bank could not control.

“Yes, the inflation index has experienced a shock ... but the famous core inflation is relatively stable,” Sanchez said.

“We think, and this has been proven up until now, that this is going to be a mini-bubble - we hope that it will be mini - away from the downward trend in inflation and that it will be transitory, and because of this it’s not necessary to adjust monetary policy.”

Analysts polled by Reuters expect inflation to rise to its highest in more than two years in July at 4.42 percent when figures are released on Thursday, after hitting a 1-1/2 year high of 4.34 percent in June.

Reporting by Krista Hughes and Michael O'Boyle

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