The Bank of Mexico (Banxico) already has the reference interest rate at maximum levels to try to contain inflation and trusts that in 2024 prices will return to their target range of 3% +/- one point or percentage, however this vision may be erroneous, since the increase in the price of products and services has not yet reached its peak in the year, which will also force the cost of credits to continue increasing.
Economists consulted by Expansión estimate that the main monetary policy instrument will be closer to 10% in the coming months from the current 8.5%.
“We are definitely not as optimistic as Banco de México in terms of inflation, since while it forecasts that it will reach levels of 3.2% at the end of next year, our estimates suggest that inflation will be at 5.3% in that period , (so) I would expect it to continue making revisions,” said Jessica Roldán, chief economist at Finamex .
The economist highlighted that despite this optimistic forecast from Banxico, the increases in the latest projections are lower than those seen in past announcements.
“The final message continues to be that the environment has deteriorated and expectations going forward are worse than a month and a half ago. The (most recent monetary policy) statement continues to have a restrictive tone,” he said.
With some forecasts described as “optimistic” it will not be strange that in the following months, Banxico will once again modify its inflation expectations, said José Luis Ortega, director of debt and multi-assets at BlackRock Mexico.
“It is likely that he will have to adjust (his forecasts) in the following quarters if the drop in inflation that is expected does not occur. It seems difficult, especially with inflation that has become more permanent,” he said.
The expert added that despite this, inflation expectations are anchored because long-term expectations maintain the same levels.
Roldán, for his part, maintained that these increases in expectations are an extraordinary fact in the face of extraordinary circumstances such as the war between Russia and Ukraine, as well as a normalization of activities after the pandemic.
Institutions such as Citibanamex estimate that the peak of inflation will occur in September, when it will be the penultimate monetary policy decision and in which it is estimated that there will be an increase of 50 basis points in the rate.
Banxico still has three more monetary policy meetings in the year: on September 29, November 10 and the last one on December 15.
For institutions such as Invex, the fact that the central bank recognizes higher levels of inflation reinforces the market’s expectation that the rate will be much higher than the consensus of 9.25%.
Finamex expects Banxico’s rate to close at levels close to 10%.