The Bank of Mexico would have to stop the cycle of cuts in the rate at the acceleration that the underlying inflation maintains, warned the chief economist of the Bx+Bank, Alejandro Saldaña.
From its perspective, the underlying inflation should be a concern factor for the members of the Government Board of Bank of Mexico, as it completed three months above 4%, which “is not congruent with a low growth environment” such as the one that prevails.
The underlying inflation is the purest indicator of inflation and offers an advance as the pressure comes forward; In July it was 4.23 percent.
In conference, to present the mid -year balance, the expert reported that the GDP forecast for this year’s GDP is maintained at 0.5%, as it is since last April, underpinned by the external sector and the resilience of the domestic sectors of commerce and services.
The expectation of GDP that BX+ has is above the market average collected by the biweekly survey of Citi, which is 0.3 percent.
The expert warned that the United States economy is slowing down and with it the risk of a lower impulse for Mexico in the export sector that “ironically” was the engine of growth for the economy in the first semester, despite the uncertainty for tariffs.
The team of economists he leads, anticipates that the interest rate should run out of change in 7.75% the rest of the year, as we currently have it, in the limit of the restrictive land.
To succeed, I would send the most careful signal in inflation since there is no room to stimulate the country’s activity, at least in the short term, monetary political route.
Relative fragility
According to the BX+economist, it will be until more confidence in the continuity of the commercial relationship with the United States is perceived, which will reactivate nearshoring.
To that extent, private investment will be replaced, which in turn can encourage economic activity. “GDP will remain relatively fragile in an environment of high uncertainty.”
Taking these considerations, he projected that the economy will have the capacity to register a growth of 1.7% next year.
With a more dynamic activity, inflation is likely to be maintained with a variation of 3.80% per year that will lead to the Bank of Mexico to resume its cycle of cuts to take the rate to 7.25 percent. A level that according to Saldaña will continue within the limit of monetary restriction.
Fiscal consolidation
He stressed that public spending restriction is helping the fiscal consolidation process, although the counterpart has been the impact on economic activity. He anticipated that spending settings will continue as a standard in the coming years, as the Treasury will try to reduce the deficit.
