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Bank Of Mexico Deputy Gov: Inflation Could Briefly Go Over Target

--Current monetary policy appropriate to reach 3% inflation target, and target range of 2% to 4%, official says

--Peso's recent depreciation will have some impact on inflation, but will be much more moderate as Mexican economic fundamentals are stronger, he says

MEXICO CITY -(Dow Jones)- Bank of Mexico Deputy Governor Manuel Ramos Francia said Thursday that the country's inflation could briefly go over the central bank's target range in the near term, but reiterated current neutral monetary stance is still appropriate.

"Current monetary policy is appropriate to reach our target. That doesn't imply that inflation could deviate in the near term," said Deputy Governor Manuel Ramos Francia in a seminar. The Bank of Mexico has a specific 3% inflation target, and a target range of 2% to 4%.

Ramos Francia said the peso's recent depreciation will have some impact on inflation, but it will be much more moderate than in previous decades as Mexican economic fundamentals are stronger.

"There will be exchange rate pass-through in imported goods, but [the effect] isn't seen as being permanent," he said.

Annual inflation measured by the consumer price index rose in the final months of 2011 to end the year at 3.82%.

The Mexican peso has lost around 15% of its value against the U.S. dollar since August, affected by increasing uncertainty surrounding the euro and the euro zone, and has become one of the Bank of Mexico's main concerns, as it could threaten inflation expectations.

The Bank of Mexico has kept its overnight lending rate target unchanged at 4.5% since July 2009. Members of the Bank of Mexico are currently assessing if the next interest rate move should be a hike or a cut, as they balance the growth risks of the euro-zone debt crisis against that of higher inflation if the peso continues to depreciate.

-By Juan Montes, Dow Jones Newswires; (5255) 5980 5178, juan.montes@ dowjones.com

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