Two weeks ago, the Fed raised the benchmark interest rate by half a percentage point, and days later, on May 12, Banxico decided to raise the benchmark interest rate by the same percentage, so that it settled at 7%.
Borja explained that the US central bank also announced that it will reduce its balance sheet starting next June.
He commented, “Then we will be very attentive to the possible effects that may arise, both in the formation of prices, on the one hand, and in the stability of the financial system of each economy.”
In the Banxico Deputy Governor’s point of view, the balance of inflation risks has been on the rise in recent months, and therefore it is necessary that it acquire a more neutral character, and that inflation helps to converge.
“That is why, in our last monetary policy statement, we used, in fact, a more descriptive tone and the possibility to act more forcefully if necessary (…) Central bank actions do not immediately affect the variables in those looking to launch and it is necessary to pay attention not only to data Observed inflation, but also of expected determinants.
As shown in Banqueco’s May 12 monetary policy announcement, the deputy governor expects inflation to converge to the target set by the Mexican central bank by 2024.
“We estimate that there is a convergence of inflation to its volatile period over the next year, with particular emphasis on the three percent inflation block during the first quarter of 2024,” Borja’s deputy governor detailed.
He noted that a gradual decrease in these pressures will begin to appear throughout the forecast horizon; That is, over the next eight quarters.
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