Mexico Central Bank: Pres. Andres Manuel Lopez Obrador Admits Breaking Law by Revealing Rate Hike Before Official Announcement

Mexico's central bank has announced an increase in its prime interest rate from six percent to 6.5 percent. However, Mexican President Andres Manuel Lopez Obrador announced it a day earlier than the Bank of Mexico.

On Friday, Lopez Obrador admitted that he broke the law when he beat the central bank in announcing that it was increasing its prime interest rate.

According to ABC News, the Bank of Mexico is officially independent of the president and is supposed to make its own decisions on rates and money supply without any interference.

Mexico's central bank issued a formal statement detailing the increase shortly after the president announced the rate hike. But even with Lopez Obrador revealing the rate hike, there is little possibility that he could face charges. He was not in the meeting of the central bank.

The meetings of the Bank of Mexico are supposed to be kept secret. Lopez Obrador said he got the information from Mexico's treasury secretary, who is invited to the meetings. The Mexican president then apologized to the central bank governor and assistant governors.

Andres Manuel Lopez Obrador Announces Rate Hike Ahead of Mexico Central Bank

In his apology, Andres Manuel Lopez Obrador said that he thought the information had already been made public when he spoke about the issue.

The president also reaffirmed his commitment to respect the autonomy of the Bank of Mexico, according to Financial Times.

It was not the first time that the Mexican president has taken financial markets by surprise. He alarmed investors when he abruptly changed his nominee to lead the bank late last year.

He chose an "obscure" public sector economist and raised fears at the time over the institution's independence. Experts scrutinized the president's announcement on Thursday, saying that it has again stoked fears that he wants to be involved with monetary policy.

Gabriela Siller, head of financial and economic research at Banco Base, said that since the Mexican president won the presidency, there were a lot of concerns about the autonomy of the Bank of Mexico.

Siller noted that the worries had resurfaced again with Lopez Obrador's announcement. Meanwhile, the Bank of Mexico has declined to comment on the matter.

Alonso Cervera, chief economist for Latin America at Credit Suisse, said Lopez Obrador's announcement puts the central bank in a "bad position."

Cervera added that people would be questioning the bank's autonomy, asking questions such as how the president knew the policy decision and who leaked it.

Mexico Central Bank's Rate Hike

According to Reuters, in setting the rate of 6.5 percent, the Bank of Mexico has cited tightening global monetary and financial conditions, prevailing uncertainty, and rising inflationary pressure connected to geopolitical conflict.

In its policy statement, the bank said the balance of risks for the trajectory of inflation within the forecast horizon has "deteriorated and remains biased to the upside."

Mexico is currently holding its annual banking convention in Acapulco, with top finance officials seen to attend, including the central bank's new governor, Victoria Rodriguez.

In March, inflation in Mexico has reached 7.29 percent, which was slightly lower than the previous two-week period. But it was more than double the central bank target rate of three percent.

This article is owned by Latin Post.

Written by: Mary Webber

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