High inflation and posture of the Fed incidence in Banxico decision

The possibility that in March the Federal Reserve of the United States will increase the fund’s bag motivated a change in the expectations regarding the monetary trend that will assume the Bank of Mexico.

The senior economist at the Oxford Economics consultancy, Joan Domene, believes that the Junta de Gobierno de Banxico can raise the tax rate to 6.75% in December.

It is expected that there will be five consecutive increments in the fund’s case, from a quarter to one, starting at the February 10 meeting.

Todavía in December, the estimate of the consultation was that Banxico will raise the tax to 6.50%, in three advertisements, refunds. One of 50 points in February and more than 25 base points.

The expectation of the first increase is 25 basis points, to incorporate the evidence of a moderate inflation.

The Bank of Mexico needs to extend the differentiation of taxes with the Fed and incorporate at the same time the international inflation pressures, consignment.

Apart from the economist jefe for Mexico of the consortium Rankia, Humberto Calzada considers that the position of the Fed will be important for the Junta de Gobierno, for subtraction which also incorporates the price that persists in sub-inflationary inflation, the figure is 6.01% annual al cierre de la primera quincena de enero.

It is estimated that Mexico will increase its funding this year, one by 25 basis points, to close 2022 with a score of 6.5 per cent.

“But in a very extreme scenario, we can say that we are down to 7%, as we are ahead of the pandemic,” said Humberto Calzada.

From his perspective, this “extremely extreme” scenario can be more inflationary, or the persistence in prices beyond the prices.

Considering that credit increases in Mexico can slow down economic crime, consider that persistent inflation is also accelerating demand.

Inflation has been a catalyst that has slowed down the crime in Mexico and is part of it that explains the reduction in GDP expectations, subtraction.

More internal factors

The economist for Mexico’s BNP Paribas, Pamela Díaz Loubet, explained that historically the Bank of Mexico tended to be less tolerant of inflation than the Federal Reserve and reacted more quickly to the change in exchange rate.

The cambiaria depreciation suele generates prices with market prices and consistently suels translate them into prices, empathy.

It is supported by a document drawn up for Mexico by the Bank of France’s origins, considered the largest in Europe, entitled “Banking, Banking for the Tone of the Fed”, to show that “Bank of Mexico tends to be restricted by the Federal Reserve return to politics ”.

During 2015, inflation in Mexico was at an all-time low since the central bank underlined the Fed’s tax rate.

In 2016, Banxico signed a petition calling on the Fed to pass the increases, given the impact of the result of the United States presidential election and the post-exchange rate depreciation.

The tax cuts in Mexico tend to prolong the price of inflation and coincide with the Fed’s cyclical cycle, including the incorporation.

Pero Banxico follows the Fed

The Fed’s task force is a factor that has been observed by the Junta de Gobierno de Banxico, as it has spent in the minutes of monetary meetings.

Particularly in the post of sub-governor Gerardo Esquivel, he was opposed to the increments of the case arguing that there is a need to guard the space for the moment when the Fed initiates the withdrawal of estimates.

In the December monetary policy decision, Banxico increased by 50 basis points on the tax, to 5.50%, Esquivel stated that “the expectation of a negative budgetary position of the Federal Reserve affects global financial conditions”.

At the previous meeting in November, the same subordinate warned that “anticipation of the normalization (of the Fed) implies that in future the debate will take place in a very restrictive terrain in order not to affect relative position”.

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