The beginning of the reduction of asset purchases by the Fed, the so-called tapering, will not add pressure to Banco de México to accelerate the rate hike or to increase the dose of each adjustment, analysts from Banco Base and Oxford Economics agreed.
Only if the cycle of rate hikes in the Fed is anticipated, the Banxico Governing Board will be pressured to take them above 5.75 or 6% next year, clarified the senior economist at Oxford Economics, Joan Domene.
If an anticipated cycle of rate hikes by the Fed is added to tapering, that would put pressure on Banxico to continue raising rates, which are now expected to be between 5.75 or 6% for next year, “he added. And it is that in that case if it will be necessary to widen the rate differential.
In addition, the director of economic analysis at Banco Base, Gabriela Siller explained that the caution with which the Fed acted for months to communicate the strategy to withdraw purchases, favored the markets to anticipate the adjustment of portfolios.
“It is very likely that there will not be a rout of investment capital outflows since the expectation is that Banxico will continue to raise the rate, maintaining the fairly wide risk premium differential, having relatively high rates and preserving credit quality,” he stressed. aside Domene.
They already adjusted portfolios
Unlike the tapering episode in 2013, when capital runs of all emerging countries occurred due to the abrupt decision to cut the purchasing program, the Fed has specified at all times that it will be a gradual and anticipated disarticulation.
In 2013, despite the turbulence caused by the Taper Tantrum, given the announcement by the Fed that the withdrawal of liquidity would begin, there was a positive flow of capital to Mexico, of 19.3 billion dollars. This between May 2013 and June 2014.
The difference now lies in the fact that foreign investors have been liquidating Mexican government assets since the pandemic began in March 2020. Information from the Bank of Mexico shows that as of October 21, 268,000 million pesos have come out. Thus, 2021 is shaping up to be the second consecutive year with historical capital outflows from the country.
The Banco Base expert highlights that this securities settlement incorporates this market advance due to the start of the Fed’s monetary policy normalization.
Reference-www.eleconomista.com.mx