Mexico central bank sees inflation risks

Mexico’s central bank said weaker demand is causing growth to slow and easing consumer price pressures, cementing expectations it will keep the benchmark lending rate at a record low at least through year-end. Policy makers said that “even when the risks to lower growth have increased, the balance of inflation risks have improved,” according to the minutes of their July 8 meeting posted on bank’s website on Saturday. Mexico’s output gap “continues in negative territory, and is closing at a slower pace than anticipated a few months ago,” they said. The central bank’s board, led by Governor Agustin Carstens, this month extended its longest-ever pause, keeping the overnight rate at 4.5 percent for a 20th straight meeting. Eurozone issues not all solved by Greek deal: Nowotny The new rescue package for Greece is a step in the right direction, but it does not mean that all problems in the euro zone have been solved, European Central Bank policymaker Ewald Nowotny told Austrian radio on Friday. An emergency summit of euro zone leaders on Thursday agreed on a plan for debt-stricken Greece that risks triggering a temporary default and that will give their rescue fund broader powers to try to prevent the crisis spreading. Asked whether there was still a risk of contagion in the euro zone, Nowotny said trust had returned to the markets thanks to the plan. Euro Rallies Versus Dollar The euro rose for the first time in three weeks against the dollar and touched a two-week high after European leaders agreed to a new bailout for Greece and expanded the role of the region’s rescue fund. The Swiss franc dropped this week against all of its 16 most-traded counterparts tracked by Bloomberg on reduced safety demand as leaders agreed to guarantee Greek bonds in money market operations if a bailout agreement triggers a default. The dollar pared its third weekly drop versus the yen before House Speaker John Boehner withdrew late Friday from negotiations with the White House on a broad deficit-reduction package.