The Governing Board of the Bank of Mexico (Banxico) warned that increased pressures on food prices have “high social costs” and could affect inflation expectations, as revealed in the central bank's minutes of its last meeting.
“Increased pressures on food prices have high social costs and could affect household inflation expectations, which would accelerate inflation dynamics even if the prices of the rest of the goods performed better,” said one Board member.
He said that increases in food prices globally “have generated a negative bias in the country's inflation.”
The minutes were released on the same day on which the National Institute of Statistics and Geography (Inegi) reported that annual overall inflation stood at 7.45 per cent in March, its highest level since 2001 and slightly above expectations.
Most members of Banxico's Governing Board commented that inflation continues to be “heavily pressured by global factors associated with the pandemic” and that this has been mainly reflected in the commodity component, which includes food.
However, they agreed that the available indicators suggest that “economic recovery could have resumed in early 2022″, although most considered that “recovery remains gradual, incomplete and heterogeneous across sectors,” the text indicated.
The minutes correspond to the March 24 meeting in which Banxico unanimously raised the interest rate to 6.5% of its members.
Banxico raised the interest rate last month for the seventh consecutive time, highlighting increased risks to inflation due to the conflict between Russia and Ukraine.
The central bank's challenge has been to raise rates to deal with inflation while Mexico is experiencing stagnation, with preliminary growth of 4.8% in gross domestic product (GDP) in 2021, below the 6% expectation expected by the government after the historic 8.2% contraction in 2020.
In the minutes, most members of the Governing Board acknowledged that inflation expectations for 2022 and 2023 increased.
Everyone mentioned that long-term expectations have remained stable at levels above Banxico's target of 3%.
At the end of March, general inflation in Mexico reached 7.45% per year, in an escalation driven by high prices of fuels such as domestic gas and gasoline, as well as agricultural products such as onions, avocados, omelets and eggs, according to the National Institute of Statistics and Geography (Inegi) ).
According to the Institute, this is the largest inflation increase in the last 21 years in our country, as in January 2001 it reached 8.11%, according to records.
Other goods that suffered a considerable increase at the end of the third month of the year were electricity, with an upward variation of 1.73% while for air transport it was 41.69% and in package tourist packages it was 12.83%.
Inegi explained that at the end of the third month of 2022, the National Consumer Price Index (INPC) showed a variation of 0.99% compared to the previous month. With this result, overall annual inflation stood at 7.45% and noted that in the same period in 2021 it was 4.67%.
With information from EFE
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