The deputy governor of Bank of Mexico Jonathan Heath mentioned that he personally considers a perspective of more hikes in the local interest rate, consistent with the complex inflation scenario in the country and with the expected increases by the Federal Reserve from the United States.
According to information from Reuters, the official said that the central institute must act with a monetary policy that seeks a balance between inflationary pressures, the conditions of the fragile domestic economy and the beginning of rate hikes in the United States.
And despite the fact that he expects Mexican core inflation to continue with an upward trend, he believes that the general inflation will be closer to the 3% target by the end of 2022, to perhaps be below 4 percent.
The National consumer price index (INPC) stood at 7.07% in January and the underlying variable accelerated to its highest level in more than 20 years, registering a variation of 6.21%, its highest level since September 2001.
federal reserve minutes
The authorities of the Federal Reserve (Fed) agreed at their January meeting that, with a more weighty inflation in the economy and solid employment, it was time to tighten the monetary policy of the United States, but also that the decisions will depend on a analysis meeting by meeting, according to the minutes of the meeting.
Participants agreed that target interest rates would likely need to rise at a “faster pace” than when the Fed last raised them in 2015.
“Still, participants stressed that the appropriate path of monetary policy would depend on economic and financial developments and their implications for the outlook and risks around them,” according to the minutes released on Wednesday.
Participants will “update their assessments on the appropriate scenario for the monetary policy stance at each meeting” as officials consider both interest rate hikes and plans to reduce Fed asset investments, according to the statements. minutes.
The document offered a more detailed account of the January 25-26 meeting, in which Fed officials agreed that it would “soon be appropriate” to raise the benchmark overnight rate from near zero, and also discussed plans to reduce the agency’s nearly $9 trillion balance sheet.
Investors expect the Fed to start raising rates in March with an initial half-percentage-point hike and to continue raising rates through the year.
Economic data released since the last meeting has reinforced the Fed’s readiness to act. January retail sales were strong with employers adding 467,000 jobs in the first month of the year, much more than expected. The most recent inflation figures showed no signs of moving away from the current 40-year high.
Last month, Fed officials also discussed plans to cut investments in Treasuries and mortgage-backed securities, issuing a set of broad principles to guide the cuts. Now they must work out the details of how much reduction to allow each month and when to start.
Expectations
For Citibanamex analysts, the Federal Reserve minutes came as no surprises, confirming a faster pace of rate hikes. “The information released yesterday regarding the meeting of the Fed’s Open Market Committee that took place between January 25 and 26 strengthens the expectation that the first increase in rates would take place in March.
“Comparing the pace of rate hikes with what happened between 2015 and 2018, participants agreed that a faster pace would likely be warranted given labor market conditions, the strength of the economy, and the persistence of high inflation. .
“Thus, we confirm our expectation for the trajectory of rates: 50 base points in March, 25 base points in the May and June meetings and quarterly increases of 25 base points in the following quarters. A total of 125 base points in the year”.
For their part, Banco Base analysts estimate that the Federal Reserve will conclude the monthly bond purchase program in March 2022 and that with it, the first increase in the interest rate will be announced, at the meeting on March 16 with a probability minimum 4 increments during the current year.
They foresee that the reduction in the balance sheet of the Federal Reserve will begin towards the second half of the year. For comparison purposes, between December 2015 and October 2017, the Fed waited 22 months between the first interest rate increase (after sitting at 0.25% for 7 years) and the start of balance sheet cuts. (With information from Agencies and Patricia Ortega)
uniones@eleconomista.mx
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