The Governing Board evaluated the magnitude and diversity of the shocks that have affected inflation and its determinants, as well as the risk that medium- and long-term expectations and price formation are contaminated, says the central bank’s statement.
He also considered the greatest challenges in the face of the tightening of global monetary and financial conditions, the environment of heightened uncertainty, the greater inflationary pressures associated with the geopolitical conflict and the resurgence of COVID-19 cases in China, and the possibility of greater effects on the environment. inflationary.
New inflation expectations
The central bank modified its inflation expectations considerably upwards. For the second quarter of this 2022, inflation is expected to be 7.6% vs. the 6.9% previously estimated.
For the third and fourth quarters of this year, the inflation expectation is 7 and 6.4%, respectively. Previous estimates were 6.1 and 5.5%.
Banxico estimates that inflation will converge to the target until the second quarter of 2023, when inflation will be 3.5%.
Inflation in Mexico reached levels of 7.68% in April, driven by the increase in food prices such as tomatoes, avocados and chicken.
“Inflation in our country continues without showing signs of moderation, especially the core item (the one that excludes volatile goods such as energy and food). There is no doubt that the authority will continue to raise interest rates in order to try to stop the escalation of prices,” CIBanco reported in a report.
The good news for Banxico, according to the report, is that the Fed is not in the same hurry that the financial market is betting on the number of times it would raise the rate and the closing levels for this 2022.
“It even helps that the president of the Fed, Jerome Powell, plans to continue raising them to 2.0% in July, but he ruled out more aggressive increases, of 75 basis points at a future meeting,” CIBanco detailed.
