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UPDATE 1-Mexico central banker says spending cuts should not hurt growth
February 2, 2015 / 7:52 PM / 3 years ago

UPDATE 1-Mexico central banker says spending cuts should not hurt growth

(Adds Carstens comment, context)

By Miguel Gutierrez

MEXICO CITY, Feb 2 (Reuters) - Mexican spending cuts should not significantly hurt growth, central bank Governor Agustin Carstens said on Monday, adding the peso’s depreciation should be limited by austerity measures and bank intervention if the exchange rate stokes inflation.

“The impact (on growth) should not be too significant,” Carstens told reporters in Mexico City after addressing opposition lawmakers.

The central bank held interest rates at a record low on Thursday as policymakers eyed the risk that a sharply weaker peso could push consumer prices higher while also noting big risks to growth.

After the policy decision was announced, Carstens said interest rate moves were not needed for the time being.

On Friday, the government cut its 2015 budget by nearly 3 percent after a drop in global oil prices hurt public finances.

Mexico’s peso has been under pressure in recent weeks and is trading around its weakest levels since early 2009.

“I would have thought that with the measures the government has taken and the disposition of the central bank to tighten our monetary policy if necessary, if the exchange is a problem for inflation, it should put a limit to the depreciation (of the peso),” Carstens said. (Writing by Gabriel Stargardter; Editing by Simon Gardner and Cynthia Osterman)

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