Fresh off of the news that Mexico's foreign reserves peaked at over $113.6 billion,the Central bank announced this week that Mexico will continue to court and accumulate additional international reserves throughout 2011. Their record breaking year in 2010 will continue into this year as Mexico strengthens its financial position,reported the Wall Street Journal.
“We have accumulated a lot of reserves and we're going to continue with that process,” said Bank of Mexico Gov. Austin Carstens in a recent speech. Although the president offered no further details,their previous actions will set the framework for their current and future expansion.
Mexico collects reserves through a system of monthly dollar put options. These options offer banks the right to sell up to $600 million each month when the peso is appreciating against the U.S. Dollar,as it has been.
In addition,the Mexican government acquires international reserve by charge dollars for its oil products through the state oil monopoly Petroleos Mexicanos. Any purchases made from Petroleos Mexicanos are paid for with dollars only,which gives the state a bank of U.S. Dollars to work with.
Following its record breaking federal reserve year,Carstens stated that the central bank will continue to monitor global inflation trends. He noted that he expects a increases in commodities prices to create a short-term increase in inflation.
“The global money supply has risen a lot,” Carstens stated. He noted that economic growth in emerging markets have created price increases in metals,oil and food. There have also been expansive monetary policies in developed countries like the U.S.
“But,” he continued,the short term inflation won't “be sufficient enough to change the benign global inflation scenario that we've been seeing. In the medium term,we'll have an inflationary environment at the world level that will help us maintain low inflation in our country.”
Economists echo this sentiment declaring that inflation rates in Mexico will be contained throughout 2011 and well into 2012. In fact,many experts expect the Bank of Mexico interest rates to stay put into 2012.