Sign in Subscribe
Internet Securities Inc.

Inflation Fight Complicated by International Price Pressures

Strategic Insights

— 1 min read

In a challenging economic environment, Guillermo Ortiz, governor of the Bank of Mexico (Banxico), warned that the fight against inflation is becoming increasingly complicated due to upward pressures from international commodity prices. Ortiz expressed optimism that downward price trends will emerge in the second half of 2005, but acknowledged that Banxico's inflation target of 3% for 2004 remains out of reach, with the year-end inflation rate likely exceeding the goal. To mitigate inflation pressures, Banxico has modified its "corto" monetary policy scheme, which affects interest rates, seven times in 2004.

Key Takeaways:

  • Banxico's inflation target for 2004 is 3%, but the year-end inflation rate is likely above this goal, standing at 5.06% for the last 12 months.
  • The governor of Banxico, Guillermo Ortiz, stated that international price pressures are making it difficult to control inflation, with downward price trends expected to emerge in the second half of 2005.
  • The "corto" monetary policy scheme, which directly affects interest rates, has been modified seven times in 2004 to reduce inflation pressure.
  • Ortiz did not rule out the possibility of changes to the inflation control mechanism in the future, but emphasized the current efficiency of the "corto" scheme.
  • Banxico aims to keep inflation at or below 3% by the end of 2004, which seems increasingly unlikely given the current rate of 5.06% for the last 12 months.
  • Ortiz predicted that inflation would likely see lateral behavior in the coming months before entering a downward trend in the second quarter of 2005.
  • The modified "corto" scheme has been a key tool in Banxico's efforts to combat inflation and achieve its economic goals.

Statistics:

  • Current inflation rate (as of September 2004): 5.06%
  • Inflation goal for 2004: 3%
  • Number of times the "corto" scheme has been modified in 2004: 7
  • Date of expected downward price trend emergence: second half of 2005
  • Predicted rate of inflation in the second quarter of 2005: frank downward trend
  • Annual interest rates affected by the "corto" scheme: Directly affected by monetary policy decisions

Sources:

  • El Universal
  • COMTEX (http://www.comtexnews.com)
  • Corporate Mexico by Internet Securities, Inc.

Read more