look ahead

The slowdown cycle is already a visible phenomenon in a considerable number of countries that, underpinned by the inflationary controls implemented by the central banks, have given a fierce fight against the general rise in prices. However, like any cycle, we are facing an event that will find a temporary fulfillment and will have to return to the naturalness of events to provide stability to the national economy. This is how, after a rise in the reference rates, the central banking policy will have to be accompanied by actions that strengthen the economic future from the actions of public policy measures and, of course, monetary policy.

We know that the inflationary rise has a hardened component that adheres more faithfully to the economic course itself. This component, identified as underlying inflation, should begin to decline at some point and it is there that, with great opportunity, a future path for the economy can be underpinned that brings us better dividends in a medium-term period. It is equally well known that the very effects of the central bank policy are induced so that they take effect within months (or even a little over a year) and, it should be noted that, in that future of months, it is necessary to prevent inflation from reaching a point at which its decline will be noticeably visible.

For this reason, the adjustment to the reference rates will be necessary in the near period when this new stabilization cycle begins. What then are the elements that are available to be able to make decisions towards a future that today would seem uncertain? The central bank will have to decipher this complex riddle so that, in 2023, it will accompany the economy as a whole through monetary and financial policy efforts. In the first place, and unequivocally, attention must be paid to the behavior of economic growth as a whole; Insufficient growth will accentuate a possible sharp slowdown in the coming years. In addition, the productivity indicators will be those that, equally, provide a more or less reliable preview of what is coming on a stormy horizon. Lower productivity in any country puts a fragile footing for a country that aspires to stability.

And, as we discussed in a previous installment of this column, our Mexican central bank must establish its own rhythm, but it does not necessarily have to be markedly different from what the US federal reserve implements. In the case of the latter mentioned, it is estimated that upward adjustments to its reference rate of approximately 2 percentage points are still planned for the coming months.

In all political, economic or human action in general, “timing” is what defines success or failure. What to do and how to read the future outlook? Let’s hope that reading is seasoned.

Twitter: @gdeloya