The Bank of Mexico (Banxico) raised its benchmark interest rate in mid-December, above what the market expected, to take it to 5.50%, citing a deterioration in inflation forecasts. The next monetary policy decision, the first of eight for the year, is scheduled for February 10. Banxico has a permanent inflation target of 3% +/- one percentage point.
Only in the month, consumer prices would have grown by 0.51%, according to the survey, while for the core index the median of the projections was 0.76%.
The increase in the National Consumer Price Index (INPC) would have been driven by price increases in some processed foods, merchandise and agricultural products.
In its quarterly report released at the beginning of December, Banco de México reiterated its perception that the increases that have affected annual inflation are “mainly temporary.” However, the main Mexican analysts affirm that to be “temporary” it keeps spreading in time.
Specifically, at the beginning of 2021 the notion of transience was based on the expectation of an increase in annual inflation in the second quarter, concentrated in April, as a result of the “base comparison effects” of the drop in energy prices. in the same period of the previous year. Subsequently, the high inflation outlook was broadened to several quarters and, in its most recent forecasts, Banxico has estimated that inflationary pressures could subside until the end of 2022. Naturally, this vision can change, in any direction and magnitude.
The problem with the ambiguity in the use of the term ‘temporary’ is that it has come to cover ever longer horizons, which contradicts the idea that it is a reversible phenomenon in the short term.
Inflation hit Latin America in 2021 as it began to recover from the coronavirus pandemic. This caused large economies such as Mexico and Brazil to be left with the highest increases in the year and in the case of Argentina, it exacerbated the problems it already had. Latin America will close the year as the region with the highest price increase in the world, according to the International Monetary Fund (IMF), which in its latest projections estimated regional inflation of 9.3% in 2021 and 7.8% in 2022.
Source From: Ambito
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