UPDATE 2-Central Bank of Mexico sees greater risk to local inflation, trails US

U.S.A.UPDATE 2-Central Bank of Mexico sees greater risk to...

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MEXICO CITY, November 25 (Reuters) – Mexico’s central bank believes the balance of risks to local inflation is skewed, upward-biased and growth in raw and food commodities, along with disruptions in production chains is suffering from.

In the minutes of its most recent monetary policy decision released on Thursday, the entity said all members of its governing board said global and internal inflationary pressures continue to impact the country’s general and underlying inflation.

Annual inflation in Mexico rose to 7.05% in the first half of November at its highest level in more than two decades, reinforcing expectations that Banksico will raise its key rate for the fifth time in a row in December.

“The majority recognized that the balance of risk for inflation in the forecast horizon has deteriorated with respect to the previous judgment and is biased upward,” according to the minutes, which, given the deeper economic integration with the United States, more Inflation in that country has contributed to the local rebound.

Prices in the United States rose more than expected in October, the biggest annual increase since 1990, giving a new indication that inflation in Mexico’s main trading partner could remain uncomfortably high next year.

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The document also showed that most members of the Governing Board highlighted that the shocks affecting inflation are primarily transitory, although they did highlight that general and underlying inflation expectations for 2021, the next 12 By the end of the month and 2022 they rose again.

Banxico has a sustainable inflation target of 3% +/- one percentage point.

The price rally comes amid a slowdown in the economy, which has been hit by the coronavirus pandemic and contracted more than expected in the third quarter.

Gross domestic product (GDP) saw a decline of 0.4% at a quarterly rate, according to seasonally adjusted figures released earlier on Thursday by the Institute of Statistics (INEGI), compared to an estimated figure of 0.2% at the end of October. Analysts consulted by Reuters expected a contraction of 0.3%.

With regard to the economy, a majority of the board estimated that it is expected to move forward with a clear distinction between sectors.

Banksico’s next monetary policy announcement, the last of a total of eight for the year, is scheduled for 16 December. (Reporting by Ana Isabel Martinez and Adriana Barrera.)

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