Analysts see Mexico inflation at double cenbank’s target in 2021, despite rate hikes

07/13/2021

Source: Reuters

MEXICO CITY (Reuters) – Though the Bank of Mexico hiked its key interest rate last month to stem surging inflation, analysts have increased their forecasts for Mexican inflation to around 6% for year end, double the central bank’s target.

Banxico, as the central bank is known, unexpectedly raised the benchmark interest rate by 25 basis points to 4.25% at its June 24 monetary policy meeting, saying it was necessary to avoid adverse effects on inflation expectations and citing price formation in the United States.

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Mexico’s Drought Is So Severe It Helped Banxico Turn Hawkish

06/30/2021

Source: Bloomberg

Mexico’s central bank raised an unusual red flag when it upended markets with a surprise interest rate hike last week: drought may pressure farm prices, it warned.

It was the only new item the central bank, known as Banxico, listed among inflation risks the day it lifted borrowing costs for the first time since 2018. The worst drought in decades, according to NASA, may have persuaded policy makers to turn hawkish, central banker Gerardo Esquivel said in a subsequent interview.

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Mexico’s president urges central bank to focus on growth too

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09/30/19 – Reuters

By Anthony Esposito

Mexican President Andres Manuel Lopez Obrador on Monday urged the country’s central bank to focus on economic growth as well as inflation, and applauded the bank’s decision to cut interest rates last week.

“With all due respect, I’d like the Bank of Mexico in addition to controlling inflation to concern itself with economic growth. That’s why I’m very glad that interest rates have been cut, it was a very good decision,” Lopez Obrador said at his daily press briefing.

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Mexico Cuts Key Rate for Second Month as Inflation Slows to Goal

""Mexico’s central bank reduced borrowing costs for the second straight month after inflation slowed to its target, the economy stalled and the U.S. cut interest rates.

The board, led by Governor Alejandro Diaz de Leon, lowered the benchmark rate a quarter point to 7.75% after cutting it for the first time in five years in August. The decision was forecast by 22 of 25 economists surveyed by Bloomberg. One expected policy makers to keep the rate unchanged, and two projected a larger half-point cut.

Mexico’s central bank reduced borrowing costs for the second straight month after inflation slowed to its target, the economy stalled and the U.S. cut interest rates.

The board, led by Governor Alejandro Diaz de Leon, lowered the benchmark rate a quarter point to 7.75% after cutting it for the first time in five years in August. The decision was forecast by 22 of 25 economists surveyed by Bloomberg. One expected policy makers to keep the rate unchanged, and two projected a larger half-point cut.

 

black and white business chart computer
Photo by Lorenzo on Pexels.com

09/26/19 – Bloomberg

By Eric Martin

Mexico’s central bank reduced borrowing costs for the second straight month after inflation slowed to its target, the economy stalled and the U.S. cut interest rates.

The board, led by Governor Alejandro Diaz de Leon, lowered the benchmark rate a quarter point to 7.75% after cutting it for the first time in five years in August. The decision was forecast by 22 of 25 economists surveyed by Bloomberg. One expected policy makers to keep the rate unchanged, and two projected a larger half-point cut.

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Mexico central bank has more reason to cut rates after low Aug inflation

peso by Guanatos Gwyn

09/10/19 – Reuters

By Abraham Gonzalez & Anthony Esposito

Mexico’s central bank now has another reason to reduce its benchmark interest rate again this year, as annualized inflation cooled in August to a nearly three-year low and the economy has struggled to pick up steam.

Several analysts raised their bets for a rate cut after inflation eased to 3.16% in August, undershooting the 3.20% consensus forecast of economists polled by Reuters poll and taking the headline rate to its lowest since October 2016.

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Mexico pulls trigger on Trump ‘contingency plan’

11/17/16 CNN Money

download (6).jpgMexico just showed the first signs of its “contingency plan” to weather a Donald Trump presidency. To save the suffering Mexican peso, the central bank, known as Banxico, raised its key interest rate Thursday, citing the U.S. election as the main reason. “The view for the global economy became more complex, among other factors, as a consequence of the election process carried out in the United States and its result,” Banxico officials said in a statement.

Banxico raised interest rates 50 basis points, or 0.50%. Investors didn’t think that was enough. The peso had been flat earlier in the day, but shortly after the announcement it was down 1% against the dollar.”The markets were expecting somewhat more,” said Carlos Serrano, chief Mexican economist at BBVA.

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Mexico: Banxico into the breach once more

09/20/16 Financial Times 

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Carstens

Peso weakness has yet again left Mexican monetary policymakers in an unenviable position. Last Friday, the MXN fell to a record low of 19.77 to the dollar, leading to speculation that Banxico will be forced to intervene in the currency markets … or even into an emergency interest rate hike, similar to the inter-meeting move it made in February.

The currency’s slump — down 12 per cent year-to-date, making it the second-worst performer in developing markets after the Argentine peso — is due to a nasty confluence of factors.

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Mexico: slower and lower

08/30/16 The Financial Times 

PenaNietoMexico, that most stable and reliable of emerging markets, may be sliding towards a credit rating downgrade. Last week S&P Global Ratings revised its outlook to negative from stable and warned it saw a one-in-three chance of a ratings cut in the next two years due to substandard growth and rising sovereign borrowings.

That caught up with Moody’s, which had lowered its own outlook back in March. And while Fitch, the third of the big three rating agencies, still sees Mexico’s rating as stable, it too warned in July of risks regarding the economy and fiscal consolidation.

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Bank of Mexico Sold $2 Billion Last Week to Boost Peso

2/23/16 Nazdaq

US dollars

MEXICO CITY—The Bank of Mexico said Tuesday it sold $2 billion in U.S. dollars on the foreign-exchange market last week to support the peso.

The country’s foreign-exchange commission, which includes central-bank and Finance Ministry officials, last week approved direct intervention in the currency markets to help lift the peso. Officials say the peso’s weakness isn’t justified by the country’s solid economic fundamentals.

The switch from daily dollar auctions by the central bank to unannounced dollar sales was accompanied by other measures including a surprise interest-rate increase by the Bank of Mexico and plans to cut government spending this year by 0.7% of gross domestic product.

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Mexico Central Bank Narrows Growth Forecast, Sees Tame Inflation

11/4/2015 Bloomberg

mexican pesosMexico’s central bank narrowed its 2015 growth forecast, saying improvement is being limited by stalled exports and weak industrial output, and that inflation will remain near policy makers’ target for two years.

Gross domestic product will increase 1.9 percent to 2.4 percent this year, compared with the previous forecast of 1.7 percent to 2.5 percent, the central bank said in its quarterly inflation report published Wednesdayon its website. Growth will then probably accelerate over the next two years, policy makers said.

While most economists surveyed by Bloomberg expect Mexico to raise interest rates in December following an expected increase by the Federal Reserve, Governor Agustin Carstens said a U.S. move doesn’t necessarily require Mexico to follow suit, given current economic conditions. The peso’s tumble to a record low has shown few signs of spurring inflation, though Carstens emphasized that the bank is watching for signs of pass-through to consumer prices.

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