Global inflation continued to rise considerably due to pressures on commodity prices, base-line effects, and multiple bottlenecks in production

The Governing Board of Banco de México decided to increase the target for the overnight Interbank Interest Rate by 25 basis points to a level of 4.50%, with effect from August 13, 2021.

They foresee an average quarterly inflation of 4.15% per year in the next 8 quarters, starting at 5.6% and ending at 3.1% per year. In turn, global economic activity continued to recover, with heterogeneity between countries due to the availability of vaccines, the evolution of the pandemic and the stimulus to spending.

Global risks include those associated with the pandemic and inflationary pressures, as well as monetary and financial conditions.

The national financial markets have shown stability in the price of the peso and increases in interest rates, particularly in the short term.

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They indicate that the recovery of the Mexican economy continued during the second quarter and is expected to continue for the rest of the year, although risks remain due to the increase in infections.

Although the pandemic has complicated the evaluation of the economy, slack conditions are expected with marked differences between sectors.

Global inflation and the effects on supply chains and on the production processes of various goods and services have pressured headline and core inflation, which registered annual rates of 5.81% and 4.66% in July, respectively.

Expectations for headline and core inflation in 2021 rose again, and those for the medium and long term remained relatively stable at levels above the target.

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The balance of risks with respect to the forecast path for inflation in the forecast horizon is on the rise. Although the shocks that have affected inflation are expected to be transitory, due to the diversity, magnitude and extended horizon in which they have affected it, they may imply a risk for price formation.

For this reason, it was considered necessary to strengthen the monetary stance in order to avoid effects on inflation expectations and to promote an orderly adjustment of relative prices and the convergence of inflation to the 3% target.

In Solili you can consult the Residential Real Estate Report as of July 2021

Original note