The rise in food prices worries Banxico’s Governing Board

Some members of the Board of Governors of Banco de México expressed their concern about the upward trajectory maintained by the prices of food merchandise.

They recognized that “the prices of food merchandise have crossed over to the prices of food services.”

According to the minutes of the monetary meeting of November 10, one of them pointed out that these items explain more than half of the variation of the underlying component and all pointed out that food merchandise is the one that presents the greatest pressure and some consider it worrisome. to continue to increase.

“All” highlighted that the inflation of food merchandise is the one that presents the greatest pressures. “Uno” commented that it has registered double-digit annual variations during the last eight months.

Some pointed out that more than 70% of their generics register annualized seasonally adjusted monthly variations of more than 10 percent.

As will be recalled, at the meeting reported in the minutes they raised the rate to 10% with a fourth consecutive increase of 75 basis points.

In the report, they highlighted that the lagged effects of the increases in food raw materials continued to drive annual inflation of processed foods, which increased from 13.38% to 13.95 percent at the cutoff of the first half of October.

Regarding long-term inflation expectations, the majority pointed out that they remained stable, although above the target. Some noted that “the distribution of longer-term expectations has been skewed toward values ​​higher than the median.”

All commented that the expectations derived from market instruments continued to increase.

Underlying also presses

According to the minutes, “some” highlighted that the pressures on core inflation persist.

All pointed out that core inflation continued with its upward trend, standing at 8.42% in October and most highlighted that it has been increasing for 23 months.

One emphasized the historically high levels of this index and another argued that it still shows no clear signs of peaking.

Information from the Inegi shows that this underlying indicator accelerated in the first half of November until completing an annual variation of 8.66 percent.

No consensus on magnitude

The Governing Board of Banco de México considers that “it will be necessary to maintain a restrictive monetary stance” to contain inflation and help it begin to decline towards the central bank’s goal.

But there seems to be no consensus on the magnitude of the upcoming adjustments, as described in the minutes of the November 10 announcement.

One observed that it is necessary to continue consolidating a restrictive monetary stance “keeping the pace of the previous decision”.

The report of that meeting shows that three of the board members agreed that “the magnitude of the next adjustments should be taken based on the information available” and assuming the increases already implemented in the bullish cycle.

Only one commented that it is necessary to slow down the upward cycle to “maintain flexibility in each decision” given the high uncertainty associated with inflationary shocks.

According to the economist for Latin America at Goldman Sachs, Alberto Ramos, although it is clear that rates will continue to rise, the impression is that they will moderate the magnitude of the increases.

In the first fortnight of November, inflation registered an annual variation of 8.14% and accumulated four consecutive fortnights of decline.

ymorales@eleconomista.com.mx