Action will be taken if inflation does not reach 5% - El Financio

Bank of Mexico (Banksico) should take action If inflation is not reduced to about 5 percent For the remainder of 2021, Lieutenant Governor Jonathan Heath said policymakers provide a clue as to when. They will again consider raising interest rates.

Panixico will try to keep borrowing costs at 4.25 percent Until the US Federal Reserve begins to raise its own rateBut heath one is whether it will depend on inflation Web light With Bonord’s economists.

Last week, monetary policy analysts surprised 23 economists surveyed Bloomberg By raising the key rate by a quarter of a percentage point For the first time since 2018, And warned against rising inflation expectations and expectations.


His decision, split among five board members, found that inflation had risen to more than 6 per cent in early June, which analysts did not expect otherwise.

“If inflation is not lower than we thought it might be close to 5%, later this year, we will have to take action,” Heath said. “It turns out that this temporary bubble is not so temporary. There may be a structural problem we need to look at.”

He noted that the central bank has been waiting three years for inflation to reach its target. Since there are new issues in pricing that were not seen last year, it is necessary to reconsider how long the bank can wait for that consolidation. Heath, considered a moderate member after a minority vote in favor of a loose monetary policy, seems to have taken a more restrained turn in his most recent comments.

Heath said he expects the current high level of inflation to accompany Mexico’s economic recovery, which could fully offset its epidemic-related losses by the end of 2022. But supply side shocks, coupled with higher prices for services on demand, have led to prolonged high inflation.

See also  The story of freedom | Montreal Journal

From the current perspective, lowering rates is practically questionable, he said.

“The best situation is the relatively long gap, the longest we can have, and wait until the central bank starts raising rates,” Heath said. “Can we maintain that ratio in the long run? Well, that’s the big question.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here