In contrast, the inflation of the present moment has its main origin in external shocks: increases in food and energy…
Pedro Aspe says in his book “The Mexican Path of Economic Transformation” that in episodes of inflation, with respect to the authorities “the worst thing is to do nothing.” The context was the heterodox stabilization program −based on social agreement− that had been implemented in 1988. With this reference, the announcement made by the current government that yesterday, Wednesday, May 4, a containment strategy for the inflation that has been unleashed would be announced.
It has been said that this strategy will evoke the one applied at the time mentioned, but the parallels are few. The first and main reason is the cause of the inflationary process that was suffered at that time, which was the so-called “inflationary inertia”. The social agreement that had been convened was precisely to overcome this inertia. In contrast, the current inflationary process has its main origin in external shocks that have taken the form of increases in key prices, such as food and energy (oil).
Having said the above, it is clear that if the strategy against famine to be announced comes as a package to control the prices of products in the basic basket, it will not be aimed at the essential causes of the problem. That is, it will have the form of a palliative, but not a healing medicine. And in any case, the monetary policy stance will have to continue to be towards tightening to avoid contamination of inflation expectations by upward pressures as much as possible.
Many analysts believe that the package against the shortage in the search for “fair prices” will take the form of a partial price control. And the only thing that can be anticipated for such a program is that its effectiveness will be limited. In the first place, because it will not include all the prices in the market. Secondly, and more importantly, in the past, both in Mexico and elsewhere, experience has proven that price control programs are barely effective in the short term. Later, the scarcity of products with controlled prices begins and the appearance of black markets to elude the teeth of control.
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