Banxico Monetary Policy Statement - 2022-06-23
Central bank: banxico | Type: decision | Date: 2022-06-23

June 23, 2022
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 raise the target for the overnight interbank
interest rate by 75 basis points to 7.75%, effective June 24, 2022.
Available indicators suggest that global economic activity slowed down during the second quarter of
2022. World inflation continued increasing, in some cases reaching levels unseen in decades, as a result
of pressures originated by the persistent bottlenecks in production, the recovery of demand, and the high
levels of food and energy prices . This environment continues generating expectations of a faster
withdrawal of monetary stimulus worldwide. Financial conditions tightened further, with an increase in
interest rates and a stronger US dollar, in a context of risk aversion. In its latest monetary policy decision,
the Federal Reserve raised the target range for the federal funds rate by 75 basis points and anticipated
future adjustments. Similarly, a large number of other central banks have continued raising their
reference rates. Among key global risks are those associated with the pandemic, inflationary pressures
lasting longer, the intensification of geopolitical turmoil, and greater adjustments in economic, monetary
and financial conditions.
In domestic financial markets, the peso behaved orderly, while short- and long-term term interest rates
increased. Economic activity is expected to continue recovering gradually during the second quarter of
2022. Nevertheless, an environment of uncertainty prevails, with slack conditions that are foreseen to
continue decreasing gradually.
In addition to the inflationary shocks stemming from the pandemic, there are pressures associated with
the geopolitical conflict and the strict lockdown measures imposed by China . Thus, in the first half of
June, headline and core inflation registered annual variations of 7. 88% and 7. 47%, respectively,
remaining at elevated levels unseen in two decades. Their expectations for 2022 and 2023 increased
significantly once again. Medium- and long-term expectations for headline inflation were revised slightly
upwards and those for core inflation remained stable, although at levels above the target.
In view of greater-than-anticipated pressures on inflation, the forecast for headline inflation was revised
upwards up to the third quarter of 2023, while that for core inflation was also adjusted to the upside for
the entire horizon, although convergence to the 3% target in the first quarter of 2024 is maintained (see
table). These projections are subject to risks. On the upside: i) persistence of core inflation at high levels;
ii) external inflationary pressures associated with the pandemic; iii) greater pressures on agricultural and
livestock product prices and on energy prices due to the ongoing geopolitical conflict; iv) exchange rate
depreciation; and v) cost -related pressures. On the downside: i) a decline in the intensity of the
geopolitical conflict; ii) a better functioning of supply chains; iii) a greater-than-expected effect from the
negative output gap; and iv) a larger-than-anticipated effect from the Policy Program to Fight Inflation
and High Prices. The balance of risks for the trajectory of inflation within the forecast horizon is biased
significantly to the upside.
The Governing Board evaluated the magnitude and diversity of the shocks that have affected inflation
and its determinants, along with the risk of contamination of medium- and long-term inflation expectations
and of the price formation process. It also considered the increasing challenges for monetary policy
stemming from the ongoing tightening of global fi nancial conditions, the environment of significant
uncertainty, and inflationary pressures associated with the geopolitical conflict and with the resurgence
of COVID-19 cases in China, as well as the possibility of greater effects on inflation. Based on these
considerations, and with the presence of all its members, the Board decided unanimously to raise the
target for the overnight interbank interest rate , on this occasion, by 75 basis points to 7.75%. With this
action, the monetary policy stance adjusts to the trajectory required for inflation to converge to its 3%
target within the forecast horizon.
The Board will monitor thoroughly inflationary pressures as well as all factors that have an incidence on
the foreseen path for inflation and its expectations. This, in order to set a policy rate that is consistent at
all times with the trajectory needed to facilitate the orderly and sustained convergence of headline
inflation to the 3% target within the time frame in which monetary policy operates as well as an adequate
adjustment of the economy and financial markets . For the next policy decisions, the Board intends to
continue raising the reference rate and will evaluate taking the same forceful measures if conditions so
require.
1/ Forecast starting June 2022.
2/ Forecast starting May 2022. See monetary policy statement of May 12, 2022. Forecast presented in the Quarterly Report January-March
2022.
3/ See methodological note on the seasonal adjustment process.
Source: INEGI for observed annual variation figures and Banco de México for seasonally adjusted figures and forecasts.
Note: Shaded areas correspond to observed figures.
II III IV I II III IV I II III IV I II
Headline (CPI)
Current (06/23/2022)1/ 6.0 5.8 7.0 7.3 7.8 8.1 7.5 6.5 4.4 3.5 3.2 3.1 3.1
Previous (05/12/2022)2/ 6.0 5.8 7.0 7.3 7.6 7.0 6.4 5.3 3.5 3.2 3.2 3.1
Current (06/23/2022)1/ 4.4 4.8 5.6 6.5 7.3 7.4 6.8 5.7 4.3 3.5 3.2 3.1 3.1
Previous (05/12/2022)2/ 4.4 4.8 5.6 6.5 7.2 6.6 5.9 4.8 3.6 3.3 3.1 3.0
Annualized seasonally adjusted quartely variation in percent 3/
Current - Headline 1/ 8.6 5.9 7.3 7.4 10.5 7.2 5.0 3.4 2.2 3.4 3.9 3.1 2.3
Current - Core 1/ 5.2 6.0 6.9 8.0 8.4 6.4 4.6 3.6 2.7 3.2 3.3 3.1 2.7
Forecasts for Headline and Core Inflation
Annual percentage change of quarterly average indices
2021 2022 2023 2024