Bank of Mexico raises 2009 inflation forecast

Special Report:Global Financial Crisis

MEXICO CITY, April 29 (Xinhua) -- The Bank of Mexico on Wednesday raised its inflation forecast by 0.25 points for the rest of this year after the first quarter figure reached 6.18 percent.

The central bank in its quarterly report estimated that inflation will reach as high as 6.0 percent, 5.25 percent and 4.5 percent in the next three quarters respectively.

"Although inflation expectations show a downward tendency for the coming months, this forecast is not exempt from risks," the bank said.

"Underlying inflation has maintained a rising trend which could be associated with the impact on the production cost structure caused by exchange rate depreciation," it said.

On Wednesday, Mexico's currency peso traded at around 13.68 to the dollar, compared with 9.86 in last August. A weaker peso means that manufacturers and consumers have to pay more for imports, which has a knock-on effect on all prices.

The bank estimated Mexico's economy will contract by 3.8 percent and 4.8 percent this year, and state-insured jobs will be reduced by 350,000 to 450,000 by the end of this year.

The Bank of Mexico on April 17 cut its target interest rate by 0.75 points to 6 percent to contain the economic fallout from the global recession.