(Expansion) – Undoubtedly, economic decisions in the United States affect economic interactions in Mexico: if fiscal stimuli are granted in the US, in Mexico the growth rebound tends to be greater due to the integration of our production chains and the volume of trade we exchange.
But also when the Federal Reserve (Fed) —the United States Central Bank— makes a monetary policy announcement, there is more than one consequence for Mexico: interest rates rise or fall in our country, the exchange rate rises or falls. peso-dollar, investments in machinery fall or increase and our exports may even increase or decrease.
The most recent – and important – announcement in many months occurred last Wednesday, June 16, when the Fed decided to keep interest rates at historically low levels, unchanged for now, amid economic optimism stemming from a major creation. of jobs but that, added to the checks of economic support for pandemic given to the population in the United States last year (equivalent to 25% of the GDP of the United States), have increased inflationary pressures.
That is to say: the US economy is recovering rapidly, but with growing concern that the general price level will rise a lot, making goods and services more expensive beyond the targets, which in the US is – since August 2020 – 2% per year average. Consequently, the consensus of an increase in interest rates towards mid-2023 – although it still sounds like a distant date – the Fed puts the central banks of emerging economies, such as Mexico, on alert.
In this context, although the Fed for now maintains the expectation of lax financial conditions – that is, interest rates remain low worldwide – it is possible that the discussion will turn to the consequences of a price escalation that will precipitate the decision. the Fed and other central banks to raise interest rates.
And it is that, in the middle of the process of economic recovery after a year of confinement and suspension of activities, keeping interest rates low means that countries like Mexico can access cheaper financing and, with it, support economic reactivation.
Specifically, when interest rates are kept low for sustained periods, people and companies favor consumption over saving, banks offer lower rates to buy cars and houses, better loans are offered to buy in stores and, in short , we consumers buy more goods and services.
For its part, after more than two years in which investment in machinery contracted (in annual comparisons, with the exception of the latest data for the month of March 2021), it is important that investors have incentives to invest in infrastructure projects – thereby improving conditions in the national labor market – and not in fixed income bonds, which would be more attractive if there were a rise in rates.
Hence, it is so relevant that the Fed announces that no changes in rates are expected in the next year and a half, since it provides conditions so that – at least for now – our central bank can maintain the benchmark interest rate at levels low, stable, and a monetary policy that promotes economic reactivation.
But beware: this does not mean that Banxico is not looking at the evolution of the i in Mexico. We must not forget that this affects more the most vulnerable people, who are those who allocate a greater proportion of their income to buy food and other basic consumer products.
Editor’s note : she is the director of a think tank that offers economic information available to everyone.
