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Bank of Mexico predicts inflation despite plan against high cost

Bank of Mexico predicts inflation despite plan against high cost

Mexico City, May 27 (Prensa Latina) The Board of Banco de México (BdeM, Bank of Mexico) on Friday predicted an inflation rise when analyzing the package against high prices and prospects for this and next year continue to deteriorate.
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In the minutes of the meeting revealed on Friday, in which the central bank decided to raise the benchmark rate by half a percentage point to 7.0 percent, some members pointed out that the anti-rising package will have a moderate effect on inflation

One of the members pointed out that the various measures are on the right track by trying to improve conditions on the supply side, with the potential to influence the price formation process and inflation expectations, and could therefore contribute to reduce inflationary pressures at the margin.

For the central bank’s governing board, the anti-cost package presented by the government and the private sector could be a factor in helping to reduce the country’s inflation levels, as long as its effects are greater than expected.

In this context, they clarified that all the elements of the bank highlighted that inflation expectations for 2022 and 2023 increased significantly. One commented that the general inflation expectations corresponding to the end of 2022 stand at 6.75 percent, registering an increase of 2.5 percentage points so far this year.

Meanwhile, some highlighted that expectations for the end of 2023 remain above the upper limit of the variability interval. Some pointed out that inflation expectations for the next 12 months are at levels close to 5.0 percent.

When deciding to increase the BdeM’s reference rate by half a percentage point, all members voted in favor except Deputy Governor Irene Espinosa.

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