The Bank of Mexico will face important challenges next year, led by inflationary pressures greater than previously estimated, greater economic uncertainty at the domestic and global level and the process of monetary normalization by the Fed, warned the Latin American economist of the consultancy international Pantheon Macroeconomics, Andrés Abadía.
The new member of the Governing Board, Victoria Rodríguez Ceja, “will have to quickly demonstrate that she has the necessary capacity to understand these challenges and solve while the capital outflow continues,” he observed.
Interviewed by El Economista, he specified that without being the responsibility of Banxico, the official will have to incorporate into her analysis the trend of the Mexican peso that results from the liquidation of capital that will persist.
“Mrs. Rodríguez Ceja will have to learn to implement monetary policy in a very negative political environment for investment at the domestic level and demonstrate the independence of the government council.”
She considers that by joining the Governing Board as Governor, Rodríguez Ceja will have to recognize the origin of the pressures associated with the strong rise in inflation in recent months.
“Due to both temporary and persistent effects, it is possible that they will begin to affect (inflation) expectations in a more pernicious way,” he said.
He added that the 22% increase in the minimum wage, together with financial volatility both locally and globally, will complicate the management of monetary policy in 2022.
Weight, emerging barometer
The strategist makes a detailed review on the impact of the normalization of the Fed’s monetary policy that he estimates will occur sometime in the second half of next year.
Emerging market central banks will face a difficult situation as they begin normalization, that is, raising rates.
The case will be particularly relevant for Mexico, since the peso is classified among investors as “the barometer of emerging markets.”
From her perspective, the new Omicron variant has introduced an important risk factor, with which the new governor will have to face ”.
Abadía pointed out that the speed and size of the rate hike could compensate by helping to contain the outflow of capital.
The eight challenges
The Pantheon Macroeconomics specialist listed eight challenges that Banco de México will face in the coming months.
- Higher inflationary pressures than previously estimated.
- Greater economic uncertainty at the domestic and global level.
- Monetary normalization process by the Fed.
- Capital outflow.
- Help stabilize the exchange rate.
- Learn to implement monetary policy in a domestic political environment that is quite negative for investment.
- Demonstrate the independence of the government.
- Quickly demonstrate that you have the necessary capacity to be in charge of the institution.
Reference-www.eleconomista.com.mx