To contain inflation, it is expected that, at the monetary policy meeting in August, the Bank of Mexico (Banxico) will increase the reference interest rate by 75 basis points so that this 2022 ends at levels of 9.50%, said Alonso Cervera, economist in chief for Latin America at Credit Suisse.
During his participation in the Fibra Educa Day, in the panel “Economic Perspectives in Mexico, moderated by Luis Miguel González, Editorial General Director of the newspaper El Economista, Cervera emphasized that the central bank’s decision to increase its interest rate by 75% was correct. basis points in the meeting held on June 23, which helped maintain stability in the exchange rate.
“It is good that the Governor of the Bank of Mexico, Victoria Rodríguez, has not shaken her hand when it comes to meeting and decreeing these increases in the rate (…) They could have been more aggressive, more relaxed, take an attitude that inflation would be transitory or temporary and the rate would have risen less, but it was not the case, fortunately, this explains why the yield curve is relatively well behaved and why the exchange rate has been stable”, Alonso Cervera commented. .
The peso registers an appreciation of 2.86% or 58.78 cents against the dollar so far in 2022, to stand at 19.9197 units per greenback from 20.5075 pesos per dollar at the beginning of January, according to Banxico.
expect more hikes
According to the Credit Suisse economist, more rate hikes are expected by Banxico for this 2022. In August, he said, the rate would remain at 8.50%, from the current 7.75%, and in the next meetings it is likely that announce increments of 50 base points and another two more than 25 base points or another two of 50 base points.
He argued that the current levels of inflation in Mexico, which in the first half of June stood at 7.88%, are unacceptable for any country, so the policy that Banxico has maintained has been positive.
In his opinion, the increase in prices will remain high in the year, but will gradually decrease in 2023.
He celebrated that the “era of free money and interest rates close to zero”, in many countries, is behind us, since it led to excessive risk taking and generated bubbles in certain assets.
“It was unnecessary rudeness by some central banks, especially to maintain the stimuli for so long (…) they took time to remove them and we are paying for it with very high rates,” he concluded.