Mexican president admits he broke law by revealing rate hike

Mar 25, 2022, 1:58 AM | Updated: 1:59 pm

MEXICO CITY (AP) — Mexican President Andrés Manuel López Obrador acknowledged Friday that he broke the law when he announced a day earlier that Mexico’s central bank was increasing its prime interest rate from 6% to 6.5%.

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

Shortly after the president announced the rate hike, the bank issued a formal statement detailing the increase.

There is little possibility the president could face charges; he wasn’t in the meeting of the central bank, whose proceedings are supposed to be kept secret. The treasury secretary in Mexico is invited to the meetings, and López Obrador said he got the information from him.

But speaking to bankers late Thursday, López Obrador said, “I want to offer an apology to the central bank governor and the assistant governors.”

“I thought the information had already been made public when I spoke about the issue. But I want to tell you I reaffirm my commitment to respect the independence of the Bank of Mexico,” the president said.

He repeated that acknowledgement at his daily news conference on Friday and accepted that it violated the law.

The president has been accused of toying with the central bank’s independence before.

In 2020, López Obrador’s Moren party raised a storm of criticism by proposing legislation that would force Mexico’s central bank to be buyer of last resort for all the U.S. cash that enters the country.

The Bank of Mexico and opposition groups expressed concern such a requirement would violate the bank’s autonomy and also leave it open to acquiring dirty cash from drug cartels. The bill did not advance in Congress.

Central banks throughout the world try to avoid leaking decisions on interest rates and other matters because advance information could give currency traders or others an unfair advantage in the market.

Mexico granted independence to the central bank in 1994, when the peso crisis made it clear that previous administrations had not been sufficiently transparent about the country’s debt.

Gabriela Siller, the director of economic analysis for Banco Base bank, said any further leaks “would significantly erode confidence in Mexico, because one of the pillars of that confidence is precisely the independence of the central bank.”

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