Banco de Mexico board decides to keep interbank interest rate at 4½%

By Caroline Salls

Pittsburgh, Aug. 21 - Banco de Mexico reported Friday that its board of governors has decided to keep the overnight interbank interest rate at 4½%, according to a bank news release.

The bank said the board will make future decisions on the rate based on the evolution of the economy, with a goal of achieving 3% inflation by late 2010.

According to the release, the contraction of economic activity in Mexico was extremely severe in the first half of 2009, but better performance is expected in the second half of the year.

Banco de Mexico said auto production figures for July showed a significant increase from the previous month, but recovery of employment is likely to be gradual and will depend in large part on the relative strength of the global recovery.

The bank said annual inflation has continued to decline as projected in the bank's last two reports on inflation.

Going forward, Banco de Mexico said inflation is expected to be in line with forecasts at about 4%.

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