Banxico Presents Quarterly Report

Mexico’s Central Bank presented the country’s quarterly report, analyzing the outlook for inflation, economic activity and other vital economic indicators. “The environment of high inflation at the global level, derived from the COVID-19 pandemic, further deteriorated due to the geopolitical conflict in Ukraine that led to an increase in energy and food prices, as well as disruptions in supply chains. This conflict has also dealt a blow to growth expectations at the global level, creating greater risk aversion,” explained Banxico via a report.

The report also analyses various activities of the bank, based on the context of the national and international economic situation by complying with the provisions of Art. 51, Section II, of the Law of the Bank of Mexico.

Banxico announced that headline inflation remained significantly above the 3 percent goal, while core inflation continued to show important increases with levels not seen in the past two decades. “Banxico has sought to conduct the monetary policy in a timely manner, working on an orderly adjustment in relative prices and in financial markets. Given the panorama of greater pressures and inflationary rates associated with the pandemic and the geopolitical conflict, as well as the monetary and financial conditions of the most restrictive global institutions, this Central Institute will continue to focus on seeking orderly convergence and sustained inflation.”

In terms of overnight interest rates, the bank’s board of governors decided to raise this by 50 base points in February, March and May 2022, placing the country at a 7 percent rate.

Mexico’s economic activity grew in 1Q22, after a dip in 3Q21 and a weak 4Q21. Banxico highlighted that a rebound in COVID-19 infections at the beginning of 2022, disruptions in the global supply chain and uncertainty regarding Russia’s invasion of Ukraine were unable to severely affect the country’s economic outlook. Economic reactivation was a reflection of the dynamism of manufacturing operations and a moderate improvement in the services sector, the bank said.