MEXICO CITY Feb 8 Top economists think Mexico's
president may name a former finance ministry official close to
his administration to replace Agustin Carstens as the head of
the central bank, according to a Reuters poll.
Alejandro Diaz de Leon, who just took a deputy governor post
at the central bank in December, is the most likely choice for
central bank governor, according to six of 10 chief Mexico
economists at major banks. Those betting on Diaz de Leon
assigned a median probability of 60 percent to his nomination.
(See factbox for details:)
Before taking over at export bank Bancomext in late 2015,
Diaz de Leon served as the head of the finance ministry's public
debt office. He was a key figure in selling President Enrique
Pena's economic reform agenda in 2013 and 2014.
A government-friendly chief at the central bank could mean a
slower pace of interest rate hikes later this year if the
economy sags further as presidential elections near.
Carstens does not leave until June and the field of
candidates could shift. But whoever replaces Carstens will face
a battle to establish credibility.
Inflation is expected to rise well above a four-year high in
January while the economy is expected to slump after threats by
U.S. President Donald Trump to crimp trade with Mexico paralyzed
investment plans and battered consumer confidence.
"For whoever is named, the honeymoon is going to be very
short," said Andrew Stanners, a fund manager at Aberdeen Asset
Management in London. "The government will be putting him under
pressure. 'Don't raise rates, cut rates if you can.'"
Mexico's central bank, which officially targets inflation
and not the currency, lost some credibility last year as it
hiked rates by 250 basis points as the peso swooned even though
inflation was below the upper target of 4 percent.
With inflation now seen rising well over 5 percent this
year, the next central bank governor will have a chance to
reestablish confidence that policymakers are targeting the
inflation rate, and not a peso level, Stanners said.
BIG SHOES TO FILL
President Enrique Pena Nieto could yet ask lawmakers to
change statutes that set age limits on nominees and strike down
a ban on foreign born candidates, which would open up a wider
field of candidates to replace Carstens, a chief architect of
Mexico's free-floating currency and massive peso bond market.
Ostensibly, Carstens is leaving to pursue his ambition of
directing a multilateral agency, the International Bank of
Settlements in Basel. He denied that his decision was due to
friction with the government, which has driven a surge in
Diaz de Leon is seen as close to Mexico's former finance
minister Luis Videgaray who is now leading talks with the Trump
White House as foreign minister.
But his views on monetary policy have not been firmly
established. Asked if he was a hawk, or more prone to act to
fight inflation, or a dove, less inclined to act, economists
were divided. Three said dove, two said hawk and four said he
If Diaz de Leon is named, then Pena Nieto would need to name
a new fifth member to the board to fill Diaz de Leon's deputy
Miguel Messmacher, the deputy finance minister who worked on
the tax structure of the country's energy reform, was seen as
the most likely nomination by six of 10 economists, with a
median 50 percent chance.
Together, Diaz de Leon and Messmacher would pack the board
with two former finance ministry officials, who some of the
economists said could be more sensitive to the government's
concerns that higher rates could slow growth.
Bianca Taylor, an analyst at Loomis, Sayles & Company played
down those concerns.
"Everybody at the central bank is very competent. This is
not a political organization that gets jostled around by
politics," she said.
(Reporting by Michael O'Boyle; Editing by Christian Plumb,