He Bank of Mexico (Banxico) could raise the reference rate by 25 basis points, which would affect private consumption and in turn investments businesses, while Mexicans’ purchases will be affected by core inflation, warned coordinator at the Trade, Economics and Business Analysis Lab (PRICE) belonging UNAM, Jose Ignacio Martinez Cortes.
“Families with incomes between 3 and 7 times the minimum wage, who use a credit card to cover these expenses for shopping in department stores, pay for school, pay for gas with a credit card, then we see how this combines with underlying inflation and an increase interest rate from the Banco de México,” he said this Thursday during an interview in Aristegui News.
The scientist explained that, despite the fact that annual headline inflation shows a downtrend, variable underlying represents “red lines” as it increased by 0.52% in March.
This is after National Institute of Statistics and Geography (Inegi) showed on Wednesday that headline inflation in Mexico slowed in March and settled at 6.85% at an interannual rate, while the base case was 8.09%. The latter is considered the best parameter for measuring price trajectory as it excludes high volatility products.
“This is where families cut their spending,” Martinez Cortez said.
However, no improvement in this parameter is expected in the near future. The facilitator estimated that the base cost would increase over the next two months (April and May).
This is due to the reduction in production Organization of the Petroleum Exporting Countries (OPEC) at the level of 1.16 million barrels per day and Russia in 500 thousand
This will cause prices to rise vigorous, which, in turn, will cause an increase in diesel, gas and gasoline in Mexico due to the fact that the country matter these products, he suggested.
Added to this is the fact that traditionally on Easter, in connection with the holidays, there is an increase in the number of services, and in May, preschool fees are paid for the next year. school cycle.
Market Uncertainty
Martínez Cortes noted that the reduction in consumption as a result of higher interest rates and high inflation caused uncertainty in the domestic market, as well as in business expectations.
He explained that consumers are buying fewer home goods than industry is producing. This leads to a reduction in production orders and gross investment in fixed assets (equipment and machines).
According to the coordinator, 72% of the economically active population earn no more than two minimal salarywhich implies a fall in income, a reduction in consumption, and an increase in the interest rate.
Faced with this, he predicted that the Bank of Mexico would raise its reference rate by 25 basis points in its next announcement. With this in mind, he urged shoppers to be prudent in their purchases with credit cards.
“The growth of interest is very high. We need to go not according to the reference tariff, but according to the departmental one,” he said. “If you stop paying on a credit card at a department store, you will be paying interest above 40%,” he said.
March 27 The World Bank He recommended formulating policies to control inflation, guarantee financial sector stability and reduce debt to avoid a “much sharper” slowdown in global growth, further lowering the “speed limit” of the global economy.
In this Wednesday, President Andrés Manuel López Obrador held a video conference with 10 presidents Latin America and the Caribbean discuss an anti-inflationary plan for the region.
Source: Aristegui Noticias
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
