The risks to inflation are on the rise. In the Quarterly Report corresponding to the July-September period, Banco de México (Banxico) explained that the balance of risks deteriorated and is on the rise, while modifying its inflation projection for the last quarter of the year from 5.7 to 6.8 percent.
Alejandro Díaz de León, governor of the Bank of Mexico, clarified that inflationary pressures, globally, have intensified due to the effects of the pandemic, as well as measures to support spending, in addition to the creation of bottlenecks, which it has been reflected in higher inflation in Mexico and, therefore, has generated an increase in inflation expectations.
“In terms of inflation, it has been one of the most important challenges globally, not only in our country. We have faced a variety of shocks that have been of greater depth and persistence than was anticipated, ”Díaz de León explained in his latest quarterly report.
In recent months, supply shocks and bottlenecks have led several countries to face the highest levels of inflation in years. In Mexico, in the first half of November, consumer prices grew 7.05%, the highest level in 20 years.
In this sense, the central bank explained that the risks that could materialize and lead to an increase in its inflation forecast are that external inflationary pressures may arise; cost pressures for businesses; persistence of core inflation at high levels; currency depreciation episodes; as well as increases in agricultural and energy prices.
GDP downward revision
Another review that the central bank carried out was on the growth estimate for this year. Previously, the monetary institution forecast 6.2% growth for 2021; however, it has now revised that expectation down to 5.4 percent.
The adjustment was mainly due to a performance of the Gross Domestic Product (GDP) below expectations in the third quarter, which was due to greater contagions from the Delta variant, as well as the reform of outsourcing and a slowdown in industrial production .
Going forward, the risks that could lead to a downward revision of the estimate, explained the Governor of Banxico, are a worsening of the pandemic that will lead to new restrictive measures; bottlenecks are prolonged and input costs rise; episodes of volatility in financial markets, as well as a recovery in investment spending lower than expected.
By 2022, the central bank improved its growth estimate to 3.2% from 3.0% previously forecast, and by 2023 it expects it to decline to 2.7 percent.
Reference-www.eleconomista.com.mx