Banxico Monetary Policy Statement - 2021-09-30
Central bank: banxico | Type: decision | Date: 2021-09-30

September 30, 2021
This document is provided for the reader’s convenience only. The translation from the official Spanish version was made by Banco de México’s
staff. Discrepancies may possibly arise between the original document in Spanish and its English translation. For this reason, the original Monetary
Policy Statement in Spanish remains the only official document.
Banco de México’s Governing Board decided to increase the target for the overnight interbank
interest rate by 25 basis points to 4.75%, effective October 1, 2021.
Global economic activity continued to recover , although at a slower pace and heterogeneously across
countries, associated with vaccine availability, the evolution of the pandemic , and spending programs.
Global inflation continued increasing due to pressures on commodity prices, base effects, bottlenecks in
production, and to stimulus spending and its recomposition towards merchandise. The central banks of
the main advanced economies have maintained the monetary accommodation, although some of them
are already expecting to diminish it, while those of several emerging economies continue reducing it.
Among key global risks are those associated with the pandemic, inflationary pressures, and adjustments
in monetary and financial conditions.
In domestic financial markets, the volatility of the peso exchange rate and interest rates have increased.
The recovery of the Mexican economy continued during the third quarter and is expected to endure for
the rest of the year and 2022. Uncertainty about the pandemic persists and slack conditions are
anticipated, with significant differences across sectors.
Global inflationary pressures and bottlenecks in production continue affecting headline and core inflation,
which during the first fortnight of September registered annual variations of 5.87% and 4. 92%,
respectively. Headline and core inflation expectations for 2021 increased again, those for the next 12
months and for 2022 also rose, while those for longer terms have remained stable at levels above the
target.
Headline and core inflation forecasts were revised upwards compared to those previously released (see
table). Considering the nature of the shocks that have affected them, the larger increases correspond to
the short term. Annual headline and core inflation projections are expected to decrease, particularly for
one year and beyond, and to converge to the 3 % target by the end of the forecast horizon. These
forecasts are subject to risks. On the upside: i) external inflationary pressures; ii) cost-related pressures;
iii) core inflation persistence; iv) exchange rate depreciation; and v) increases in agricultural and livestock
product prices. On the downside: i) a widening of the negative output gap; ii) additional social distancing;
and iii) exchange rate appreciation. The balance of risks for the trajectory of inflation within the forecast
horizon is biased to the upside.
Although the shocks that have increased inflation are expected to be transitory, due to their variety ,
magnitude, and the extended horizon over which they have affected it, they may pose risks to the price
formation process and to inflation expectations. In order to avoid such risks, it was deemed necessary to
reinforce the monetary policy stance by adjusting it to the trajectory required for inflation to converge to
its 3% target within the forecast horizon. The Governing Board decided to increase the target for the
overnight interbank interest rate by 25 basis points to 4.75%.
For the next monetar y policy decisions, the Governing Board will assess the factors that have an
incidence on the foreseen trajectory for inflation and its expectations, in order for the policy rate to be
consistent at all times with the orderly and sustained convergence of headline inflation to the 3% target
within the time frame in which monetary policy operates , enabling an adequate adjustment of the
economy and financial markets.
Voting in favor of the decision were Alejandro Díaz de León, Irene Espinosa, Galia Borja and Jonathan
Heath. Voting in favor of leaving the target for the overnight interbank interest rate unchanged at 4.50%
was Gerardo Esquivel.
I II III IV I II III IV I II III
Current (09/30/2021) 1/ 4.0 6.0 5.8 6.2 5.6 4.3 3.5 3.4 3.3 3.2 3.1
Previous (08/31/2021) 2/ 4.0 6.0 5.6 5.7 5.2 3.9 3.2 3.4 3.1 3.1
Current (09/30/2021) 1/ 3.9 4.4 4.8 5.3 5.4 4.8 4.0 3.4 3.1 2.9 2.8
Previous (08/31/2021) 2/ 3.9 4.4 4.7 5.0 5.1 4.4 3.6 3.3 3.1 3.0
Note: Shaded areas correspond to observed figures.
Forecasts for Headline and Core Inflation
Annual percentage change
Source: INEGI for observed figures and Banco de México for forecasts.
2021 2022
1/ /Forecasts as of September 2021.
2/ Forecast as of August 2021. Quarterly Report April - June 2021.