Bank of Mexico officials insist that failure to act in the face of a significant increase in inflation puts the anchoring of expectations and the credibility of monetary policy at risk. This is how it reads in the minutes corresponding to the monetary meeting of November 11.
If this is the case (to undock) it would make it difficult to achieve the objective and would lead to the amplification of the negative effects that the crashes have, they detailed.
Therefore, the increases in inflation must be matched by proportional adjustments in the monetary stance, agreed at least two members of the Board.
This report corresponds to the meeting of the fourth increase of 25 basis points, when they took the rate to 5% and it was before the surprise increase of 50 points in December. Expectations are important for Banxico, because their increase explains 31% of the dynamics in prices in Latin American countries, such as Mexico.
A few days after the fifth increase in the rate, Governor Alejandro Díaz de León explained to El Economista that the trajectory that inflation has maintained led to “a mismatch in expectations that does not qualify as a dislocation.”
“A de-anchoring (of expectations) would mean that there is no focal point on which the forecasts gravitate,” he explained in an interview. As is happening in most economies, short- and medium-term expectations have increased, and it is an effect that results from the complex shocks that Covid-19 has generated ”.
Financial sector strategists consulted by Citibanamex estimated that not even in 2023 will inflation return to the specific target of 3 percent. According to their calculations, within two years the annual variation of the National Consumer Price Index (INPC) will be at 3.72%, a forecast that incorporates a second consecutive upward correction from 3.70% predicted by them at the beginning of December.
In the aforementioned survey, the experts also raised their inflation projections to 7.66% for 2021 and to 4.16% for 2022. Both estimates are above the specific goal of 3% percent.
For the Director of Economic Research in the Veracruz SAVER ThinkLab, Luis Pérez Lezama, inflation expectations are already unanchored and a clear example is the escalation of prices that is perceptible in daily purchases.
The producers have already ended up transferring the cost of fluctuating electricity, gas and gasoline rates into their prices, he observed.
Tainted prices
The president of the National Association of Small Taxpayers (ANPEC), Cuauhtémoc Rivera uses weather forecasts to explain that, when they anticipate the temperature at a certain level, they describe that the thermal sensation is lower or higher.
The same is happening with final pricing, he noted. Inegi says that inflation is 6.23%, but it turns out that the consumer who buys a kilo of apples, or tangerines, sees that he is not enough to buy the same amount that he took months ago, or last year.
Producers are raising prices, the intermediary also applies the increase and the final consumer receives it with an escalation that is rising much faster than their income, said Rivera.
Both agree that there is a price contamination that is generalized.
Rate hike will focus expectations
The final inflation expectation for this year, collected by Citibanamex in the survey, incorporates 12 consecutive revisions up from 3.66% that they projected at the beginning of 2021.
The estimate they now have for inflation in 2022, of 4.16%, shows a fifth increase that clearly exceeds the forecast obtained at the beginning of the month, which was 4.12 percent.
For the central banker, these are adjustments in medium-term expectations that will stabilize once they incorporate the impact of the rise in the interest rate that in December surprised the market by giving 50 basis points.
With it, the chief economist of Go for More agrees, Alejandro Saldaña, it is worrying that expectations are changing in such an important way, although it is understood by the situation that is causing it and that continues to be extraordinary: the heterogeneous reopening of the economies after the shock of the pandemic.
As explained by the Governor of Banxico, the trajectory of inflation is showing the simultaneous effect of supply and demand shocks, exacerbated by the bottlenecks that arise in global supply chains given the evolution of the pandemic and its impact. in the reopening of economies.
Reference-www.eleconomista.com.mx