As inflation levels remain above the target, pressures on the economy will continue. Central Bank of Mexico (Banxico) so that you increase the rates in your next meetings, specialists estimate.
According to an analysis carried out by Alejandro Saldaña, chief economist of Grupo Financiero Ve por Más, inflation is expected to close the year at 6.20% and fall from 4.00% until mid-2022, because they estimate it will persist, to a certain extent. measure, the obstruction in timing chains.
In addition, the rebound in energy prices and the expectation that they will remain high in the winter, is an element of additional risk.
“Given this and the possibility of more episodes of exchange rate volatility, due to the beginning of the normalization of the Fed’s position, we do not rule out another increase in the target rate of Banxico this year,” he says.
According to Go for More, they estimate that by the end of 2021, Banxico will locate the interest rate at 5% and the 10-year rate stands at 7.10% from the current 7.36%.
“Despite the transitory price hike, it has been greater and longer than expected. With this, the Central Bank considered it necessary to “reinforce” its position, to prevent price expectations from loosening, “they explain.
“As in the two previous decisions, the increase in the target rate was decided by majority. The difference was that, on this occasion, four votes in favor were counted to one against, when previously they were three against two. Deputy Governor Gerardo Esquivel was the one who opposed it again ”.
Likewise, that the communiqué of Banxico It is said that although the country’s economy continued to improve in the third quarter of the year and the recovery is expected to continue until 2022, this outlook is still uncertain. On the other hand, it recognized a deterioration in financial conditions, given the recent pressure on the exchange rate and interest rates.
“In terms of inflation, it was stressed that the latest data suffered the impact of global pressures and obstacles in production. The increase in short- and medium-term price expectations was also noted, plus long-term expectations did not see a major adjustment ”, he explained.
“The Institute reaffirmed that inflationary pressures are transitory, but revised its estimates upwards. The adjustment was made throughout the entire period, being more marked in the short-term forecasts; It was mentioned that the variable will stabilize around 3% towards the end of the horizon (before: 1Q23). Finally, it was stated that the balance of risks continues to be biased upward ”.
The International Monetary Fund (IMF) suggests a faster pace in the increase in Mexico’s funding rate if medium-term inflation expectations begin to rise.
A medium term incorporates a horizon of 3 or 4 years, as explained by the Economic Counselor of the Fund, Gita Gopinath.
“The patient approach (the gradualness of the rate hike) is supported by the fact that Mexican policy rates, the product and inflation have historically moved very closely with those of the United States (…) but the monetary policy in Mexico it must be very in tune with the evolution of its inflation expectations ”, they detailed in the preliminary report of conclusions of experts of the IMF after the review made by the mission of specialists to Mexico ”.
The rebound in energy prices and the expectation that they will remain high during the winter is an additional risk element. USA photo: Gilberto Marquina