IMF sees risk of more general inflation due to underlying resistance

The International Monetary Fund (IMF) warns that the resistance of Mexico’s structural inflation, the underlying one, indicates that the pressure on general prices in this year 2022 can be much more generalized.

The Underlying inflation It discounts the traditionally volatile prices of some products and in the case of Mexico, it completed 21 consecutive two weeks with the increase in the first half of January 2022 and beyond the allowable limit of the target, which stands at 6.11 percent.

This pressure will motivate rate hikes by the Bank of Mexico (Banxico) which will also generate pressure on the economic recovery that is returning little by little to the historical trend, he stressed.

In the first update of the official blog for Latin America of the new Director of the Western Hemisphere of the IMF, Ilan Goldfajn, explains that wage pressures and indexation practices in some countries push prices higher. Indexation is the automatic adjustments of the contracts with respect to inflation.

The official, from Brazil, where inflation was more persistent, explained that if rising prices threaten to exceed expectations, central banks will have to raise interest rates further to maintain their continued commitment to inflation targets.

Goldfajn suggested that governments in the region combine measures against inflation and structural policies that encourage growth.