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Is a Preemptive Strike from the Bank of Mexico in the Cards?
With Mexican monetary policy at an important juncture, ECRI has just updated its Mexican Future Inflation Gauge (MXFIG), providing unique insight into pressures on monetary policy in the coming months.
Faced with a weak peso, lackluster business and consumer confidence, sluggish exports, and cuts to government spending, consensus forecasts of Mexican growth fell for the sixth straight month in March. Indeed, the peso, which plunged to a record low recently, has been the focus of concern at the Bank of Mexico (Banxico). Owing to fears of inflation and financial instability, Banxico is widely expected to start raising its official interest rate from its record low, especially once the Fed starts “liftoff” of the fed funds rate. But with the weak peso seemingly having little “pass-through” effect on consumer price inflation, which stands at a record low, interest rate hikes could further dampen Mexico’s economic growth prospects.
In our latest MXFIG update, we clarify the outlook for Mexican inflation, providing valuable insight into Banxico’s policy options in the months ahead.