Banxico must navigate the complex environment of a weak economy with inflationary pressures: the International Monetary Fund

(Bank of Mexico)BanxicoThe Deputy Director of the International Monetary Fund (IMF) Financial Markets and Capital Markets Department has warned against “continuing to navigate the complex environment” of a weak economy that is now also facing pressure to achieve its inflation target; Evan Papagiorgio.

He explained: “Looking to the future, the central bank must achieve a delicate balance to move between the weakness of the economy (…), and at the same time confront the increase in inflation driven by the rise in commodity prices.”

Interviewed by The Economist“The hardening of external conditions due to the increase in the yield curve in the United States,” Papagorgio added to the complex panorama facing Mexico.

He stressed, “We are confident that Banco de México will continue to handle this difficult trade-off very effectively” (the struggle of choice at the expense of what has been abandoned).

From the headquarters International Monetary FundIn Washington, DC, the official admitted that “the previous interest rate is still positive and above its Mexican counterpart in emerging markets.”

Indicates the positive return that Mexico continues to provide when discounting projected inflation, which according to International Monetary Fund, It will average 3.5% at the end of the year, which still gives a positive margin of 0.5 points in a global context of zero and negative rates.

But he made it clear that “the weakness of the economy still requires maintaining an accommodative monetary stance,” like the one who led it since February 2020.

At the end of the press conference, they released the semi-annual report Global Financial Stability ReportThe official admitted that the central bank has provided significant support to the economy.

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He specifically referred to the 300 basis point cuts in the interbank financing rate that the board had led since February 2020, bringing it up to 4% where it currently is.

He explained that by extending the count since the start of the facilitation cycle (in August 2019), the rate completes cutting 425 basis points from 8.25% where it was in February 2019.

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Aileen Morales

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