There were no surprises. Banxico’s governing board, headed by Victoria Rodríguez Ceja, decided forcefully and cautiously.

As most analysts anticipated, it raised its benchmark rate by 75 basis points. He placed it at 7.75%.

The surprise would have been that he increased it by 100 base points and placed it at 8%. Facts had been registered that marked that possibility.

The aggressive increase of 75 base points previously announced by the United States Federal Reserve and that took its interest rate to a range between 1.5 and 1.75 percent.

The FED applied its largest increase to the reference interest rate in the last 28 years.

He did it to combat the highest inflation of the last 40 years. As of May, it shot up to a level of 8.6% and the purpose is to take it to 2%.

The Fed made it clear that it is willing to tighten its monetary policy despite the risk of the US economy slipping into recession as many analysts already anticipate.

That was a first element that Banxico’s governing board undoubtedly had to consider.

Another key element that had to be taken into account is the inflation data that Inegi released yesterday.

The statistical agency reported that inflation picked up in the first half of June and stood at 7.88%.

The annual rate of core inflation for this period was 7.47%, higher than the previous month.

The annual rate of non-core inflation was 9.13%, higher than that observed in the previous period.

Inflation has not peaked, as many have come to believe, in the month of May.

It should be remembered that inflation in May was 7.65% lower than the 7.68% in April.

The uncertainty regarding the extension of the inflationary phenomenon is what is placing the central banks of practically all countries in serious trouble.

Banxico is no exception. But he has acted cautiously and firmly. The Mexican central bank has made it clear that it is willing to raise its interest rate as much as necessary to fight inflation.

In fact, at his last meeting he warned that he would act forcefully. That is why some analysts even thought about the possibility that it might decide to apply an increase of 100 base points.

However, he did not do it. It applied an increase of 75 base points as already discounted by the markets.

In any case, it is an important and singular increase. For the first time in its history, Banxico applied an increase of 75 base points in its reference rate to place it at 7.75%.

It is the ninth consecutive increase. Banxico has applied a cascade of 8 increases. Four of them of 25 base points and 4 more than 50 base points.

Banxico’s reference interest rate went from 4% in June to 7.0% in May 2022. With the ninth increase applied yesterday, it goes to 7.75%.

It was a unanimous decision of the members of Banxico’s governing board. The deputy governors: Irene Espinosa, Jonathan Heath, Gerardo Esquivel, Galia Borja and Governor Victoria Rodríguez Ceja, voted in the same way.

Banxico foresees more inflationary pressures. In its monetary policy announcement, it “importantly” increases its inflationary expectations for 2022 and 2023.

“The revised path for inflation over the next eight quarters now sees the peak in the third quarter of 2022 (previously it was the second) and the average inflation of the last quarter of this year at 7.5 percent (previously at 6.4 percent)” , Deputy Governor Jonathan Heath warned, through his Twitter account.

Banxico is seeking to maintain and position itself in a complicated balance that allows it to simultaneously combat inflation, lower inflationary expectations and an interest rate differential with respect to the US rate, which is sufficiently attractive.

Internally, Banxico must preserve the credibility and confidence of the institution implicit in its autonomy from the Federal Executive.

Everything indicates that the collegiate body of the institution opted for caution and reserved, to continue using its arsenal against inflation, whose upward spiral has no end date.

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Marco A. Mares


Rich and Powerful

He has worked continuously in newspapers, magazines, radio, television and the Internet, in the last 31 years he has specialized in business, finance and economics. He is one of the three hosts of the program Alebrijes, Águila o Sol, a program specialized in economic issues that is broadcast on Foro TV.


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