Investment strategists consider that the peak of inflation in Mexico will occur in September, as the Bank of Mexico anticipates, but they warn that the deceleration of the escalation of prices will be much slower than the central bank foresees.
Gabriela Soni, Chief Investor of UBS Asesores México, warned in an interview that upward pressures on inflation may continue as the process of dismantling the gasoline subsidy strategy.
He also stressed that the slowdown in inflation will also be impacted by the few incentives that oligopolies have to reduce prices.
These events will cause a lag and pass-through of lower food prices to processed foods.
In addition, the chief economist of Bank of America Securities, Carlos Capistrán, projected that the prices of services will continue to be pressured and that the impact of the increase in tuition registered in September and that was contained during 2020 and 2021 is still missing.
As a consequence of this scenario, they revised their year-end forecast for inflation upwards to 8.6% from the 7.9% they previously projected.
This new forecast incorporates the expected effect of the dismantling of the gasoline subsidy strategy as well as the coming increase in the minimum wage.
The perspective of the Barclays economists is also of a consistent rise in prices in Mexico that will continue to move it away from the end of the upward cycle of rates.
From London, the senior economist at Pantheon Macroeconomics, Andrés Abadía, trusted that the weakness of the economy will help reduce inflationary pressures in the coming months.
He estimates that headline inflation will end the year at around 8.2%, a level that he considers “still too high” and the risks are heavily tilted to the upside.
The rate will continue to rise
Despite reaching the peak of inflation, strategists anticipate that Banco de México will continue to increase the rate, which today stands at 8.50 percent.
Experts from Bank of America and Barclys project that the September 29 announcement will be a 75 basis point rate increase, which will take the yield to a level of 9.25 percent.
Separately, the economists of the aforementioned investment banks consider that the monetary decisions of Banco de México will continue to reflect the actions of the Federal Open Market Committee of the Fed (FOMC), for which they project that the rate year-end in Mexico will be 10 percent.
There are still three announcements scheduled this year. That of September and the announcements of November 10 and December 15, which would imply that the rest of 2022 will continue the upward cycle in Mexico, contrary to that of Brazil, which according to Barclays experts, has ended.
The UBS expert refers to the firm’s economists to explain that the rate will reach 9.5% by the end of this year and maintains that given the risks for inflation, Banxico is likely to maintain a much more aggressive rate hike path than the Fed.
The internal thermometer
In its weekly analysis, Barclays anticipates that inflation will continue to rise in Mexico, Chile and Colombia, in contrast to the cases of Brazil and Peru where they consider that it has already reached the ceiling, having reached 8.8 and 8.4%, respectively.
As a result of this inflationary performance, they consider that Brazil has already finished its cycle of increases after two consecutive months of deceleration in price escalation.
They qualified that the large deficits of Chile, Colombia and Peru, as well as the connection of the US economy in Mexico, will force the central banks to continue raising the rate.
Just last week, Banco de la República de Chile increased the rate to a historic 10.75%, the same as Banco de la Reserva de Perú, which left it at 6.75 percent.
The Bank of the Republic of Colombia is quoted for the announcement on September 29, the same as Mexico.
ymorales@eleconomista.com.mx
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