Inflation: transitory to persistent

Reality defeated official hope and forced the authorities to call things by their name.

Finally, in the official language, inflation ceased to be transitory. It is now recognized that this is a persistent inflationary phenomenon.

In the private sphere, the specialists surveyed periodically by Banxico consider that inflation will be the greatest obstacle to economic growth.

The economic problem that Mexico is experiencing is very serious. An expectation of diminishing economic growth and at the same time an inflationary wave that seems unstoppable.

And the worst thing is that it is an imported inflation, so there is little internal margin to reduce the phenomenon.

Today it is admitted that inflation will take between 1 and 1.5 years to resume its course towards convergence with Banxico’s target.

At least, that is how the undersecretary of the Treasury, Gabriel Yorio, let it be seen. The inflationary pressures faced by the Mexican economy are not transitory, but have a longer-term persistence; Mexico’s inflation rate will take some 12 to 18 months to come down to its target.

The official clarified that the Treasury participates in the meetings of the Bank of Mexico with a voice but without a vote, but said that they practically agree (the agency responsible for public finances and the central bank) with the reading that Banxico has and that is why there is no longer talk of transitory inflationary pressures.

Yorio, who is known for using clear language and not beating around the bush in his messages, spoke during the Cátedra SHCP 2022 conference, organized by the Ministry of Finance itself and the Faculty of Economics of the National Autonomous University of Mexico (UNAM).

The undersecretary acknowledged not being clear to what level the Bank of Mexico will raise its reference rate, which to date stands at 6.5% (with 3 adjustments of 50 basis points).

But he recalled that a year ago the rate expectations were around 7.2% and now they are at 9% or 9.25%, which implies an increase of just over 200 base points.

The official’s statements are recorded just as the central bank released the periodic survey it conducts among private sector specialists.

Experts believe that inflation will be the biggest risk to the economy this year.

They expect inflation to remain outside the range for the second year in a row. In fact, inflation has already completed nine upward revisions.

His forecast is that annual inflation will close at 6.67% in 2022. That is, more than double the range of 3% +/- 1 percentage point.

The forecast has been revised almost a dozen times from 3.79% in July 2021.

Experts estimate that Banco de México will maintain its policy of increasing rates to place it at the end of the year at 8.36%.

The outlook is complicated, from the perspective of specialists to the extent that they project that the Mexican economy will grow at a rate of 1.73% at the end of this year.

This is a new downward revision, the fourth in a row since it forecast growth of 2.79%.

Banxico’s survey of private sector specialists reveals that inflation expectations have risen for 9 consecutive months; core inflation has remained the same or increased for 16 months in a row and growth expectations have been reduced for the 7th consecutive month, warns the director of economic analysis at Banco Base, Gaby Siller.

If the expectations of the Banxico survey are met – the expert points out – this six-year period there would be a GDP growth of 1.63%, which implies an average annual growth of 0.27%, the lowest on record with the series available in Inegi.

glimpses

DECREE.- A decree is coming to give flow of flights and passengers to Felipe Angeles International Airport.

It is a film that we have already seen, with the Toluca airport. In recent years, another government had the idea of ​​forcing airlines to provide service from that air port. Over time, as soon as they could, the airlines stopped flying from the Toluqueño airport. No market works by decree.

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