WRAPUP 1-Mexico cenbank chief says no need to raise rates

* Central bank chief says no need to raise interest rates

* Mexico inflation seen tamer, growth view rises

* Economists see Mexican growth of 3.3 percent in 2010

By Jason Lange and Nigel Davies

MEXICO CITY/MADRID, Feb 2 (BestGrowthStock) – The head of Mexico’s
central bank said on Tuesday there is no need to raise his
country’s interest rates and economists following its economy
now see higher growth and more benign inflation in 2010.

Economists in late January cut their inflation forecast to
4.93 percent while raising their average 2010 growth outlook to
3.3 percent, a monthly poll by the bank showed on Tuesday. For
more see [ID:nN02244111].

The central bank is expected to raise rates this year to
head off inflation although its governor, Agustin Carstens,
said in Madrid that he is not very worried about inflation.

“There is no need for monetary changes,” Carstens said.
[ID:nLDE6110QK]

The bank, which kept rates at a six-year low of 4.5 percent
in January, next meets to discuss monetary policy on Feb. 19.

The poll probably eases what Carstens has described as a
chief concern: recent hikes in tax rates and fuel prices might
boost inflation expectations and spur future price increases.

Analysts in the bank’s previous poll saw the economy
growing 3.1 percent and prices rising 5.04 percent.

Hours before the poll’s release, Carstens said “inflation
pressures are well anchored and there is no problem for now.”

Mexico’s value-added tax rate rose 1 percentage point this
month, hiking prices for most consumer goods, and the
government plans to raise fuel prices this year to help public
finances battered last year by a deep recession.

Mexico’s economy is rebounding because of higher U.S.
demand for Mexican exports like cars and refrigerators, after
likely shrinking by around 7 percent in 2009.

Carstens has argued that the recovery will be too weak to
fuel inflation, however, even though he said on Tuesday that
the economy will probably grow about 4 percent this year.

Carstens also said the tax hikes will not have a lasting
effect on the rate of price increases.

“We are seeing the transitory effects of a rise in VAT and
fuel costs,” Carstens said, adding that was the reason not to
raise borrowing costs.

Washington-based economist Pedro Tuesta of 4CAST said the
falling inflation expectations showed that market players
believe Carstens’ argument that the tax hikes will only have a
one-off effect on inflation.

The central bank has a long-term target to keep inflation
at 3 percent. Annual inflation was at 4.17 percent in
mid-January.

Stock Market Today

(Additional reporting by Luis Rojas Mena in Mexico city;
Editing by James Dalgleish)

WRAPUP 1-Mexico cenbank chief says no need to raise rates