“A contraction in the United States because the Fed raised interest rates very aggressively and whenever the Federal Reserve raises interest rates aggressively, then the economy slows down,” he said. Carlos Capistrán, chief economist for Mexico and Canada Bank of America Securities.
The Federal Reserve has made three increases of 75 base points and one more than 50 points in 2022 as a measure to contain high inflation. The reference rate in the US is 4.25% and it is estimated to reach levels of 5%.
Capistrán anticipated that the contagion for the Mexican economy will come from the side of exports and via remittances.
“We export durable goods to the United States such as cars, televisions, washing machines, etc. and when interest rates rise, people stop consuming these types of products,” he explained.
With lower demand for these goods, Mexico will see a slowdown in its exports and lower growth.
On the remittance side, unemployment is expected to rise in the United States and dollar remittances to the country begin to decline. Remittances to Mexico already represent 5% of the country’s GDP, according to the economist, and help consumption.
“Almost all the increase in consumption in the last two years is explained by remittances,” he said.
Last November, remittances had a monthly deceleration of 10.43% with an amount of 4,801.5 million dollars. The data stood out because 6 months had passed with arrivals of money above 5,000 million dollars.
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