(Bloomberg) -- Mexico President Andres Manuel Lopez Obrador revoked his nomination of former Finance Minister Arturo Herrera as governor of the country’s central bank in an unexpected U-turn that adds uncertainty at the helm of the monetary authority with inflation approaching a two-decade high.
Lopez Obrador told Herrera a week ago that he decided to reconsider his nomination to lead Banxico, as the central bank is known, the former official said in a tweet late Tuesday. The president had announced in June that Herrera would take over the central bank in 2022, but the executive branch then quietly withdrew the nomination in August, according to senate majority leader Ricardo Monreal.
“Herrera is a good candidate, a man who knows the material and a man who has the knowledge for the role, but this is a decision of the Executive,” Monreal told reporters earlier on Tuesday, without signaling who would be the president’s new pick. “The executive will surely, in the next few days, send the same name or another name.”
The president’s office didn’t respond to repeated requests for comment. The Finance Ministry and Banxico, as the central bank is known, declined to comment.
The surprise about-face casts doubt on the future leadership of Banxico at a time inflation is expected to reach 7% by the end of the year, according to a survey of economists. That would represent a 20-year high that more than doubles the central bank’s target. Since June, Banxico has increased interest rates by 100 basis points to try to tame price gains.
“This is certainly generating nervousness among investors,” said Carlos Capistran, chief economist for Mexico and Canada at Bank of America Corp. “The market is anxiously waiting to hear who the new nominee will be.”
Local news outlet Arena Publica on Tuesday morning reported that the president had decided not to name Herrera to the bank. The presidency and Finance Ministry are preparing a communication strategy to reassure the markets and a decision will be announced in the coming hours, the site reported, citing unidentified government sources.
The Mexican peso trimmed the day’s loss after the report, but remains under pressure close to its lowest level since early March.
Herrera, who was a loyal operator during his two years running the Finance Ministry under Lopez Obrador, was expected to take over Banxico when current Governor Alejandro Diaz de Leon’s term finishes at the end of this year. He was seen as a potentially dovish voice in a bank that has been cautiously hawkish as the economy slowly recovers from the effects of the worst months of the Covid-19 pandemic.
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