Mexico Central Bank holds benchmark rate

In an expected move, Mexico's central bank holds benchmark lending rate steady, with prices increasing and economy weakening.

Mexico's central bank will hold firm its benchmark overnight interest rate at 7.50 per cent. Inflation reports come in good, with inflation within the target range for 2007. Yet, reaching current inflation goals may be more difficult.

The country's goal is to reach 3 per cent inflation and these moves help them to secure that target. Food prices still are growing too fast, though. They have not yet hurt general prices at this point, reports the central bank. The bank reports indicate they are monitoring food costs closely as a "concern" to them.

On another note, the Mexican economy is not where it should be, as a slowdown becomes more likely. Economists report that this could worsen this year. Yet, most believe that the economy will hit its target mark of between 2 and 4 per cent.

A key determining factor in what the economy here will hold is food prices. Additionally, a tax hike, which is planned to happen, will also hurt economic concerns. While the country strives to reduce inflation to 3 per cent, this is unlikely until food prices and taxation stabilizes. The central bank's goals for reaching the 3 per cent goal have moved the timeline farther back, towards the end of 2009. The slowing US economy will play a role here, too.