Banxico Monetary Policy Statement - 2022-12-15
Central bank: banxico | Type: decision | Date: 2022-12-15

December 15, 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 50 percentage points to 10.50%, effective December 16, 2022.
World economic activity recovered slightly during the third quarter , although the outlook for 2023
continued deteriorating. Global inflation remains high, while in some economies headline inflation
decreased in response to lower pressures on food and energy prices. A large number of central banks
continued raising their reference rates. Some of them mentioned that they would start moderating their
pace of adjustment. These reference rates , however, are foreseen to remain at high levels for an
extended period. In its latest monetary policy decision, the Federal Reserve raised the target range for
the federal funds rate by 50 basis points, after having increased it by 75 basis points four consecutive
times. It also anticipated additional increases. Among key global risks are those associated with the
pandemic, the persistence of inflationary pressures, the intensification of geopolitical turmoil, and tighter
monetary and financial conditions.
The Mexican peso continued showing resilience, although with some volatility. Short-term interest rates
increased while medium - and long -term ones decreased significantly. The Mexican economy is
anticipated to have continued recovering during the fourth quarter , although at a slower pace . Slack
conditions are thus expected to continue diminishing.
In November, headline inflation continued decreasing to a level of 7.80%, due to a reduction in its non -
core component . Core inflation, on the contrary , continued trending upwards, reaching 8. 51%. Both
headline and core inflation were at levels below those of analysts’ expectations. Expectations for headline
inflation for 2022 and 2023 were revised downwards, while those for core inflation were again adjusted
slightly upwards. Those for the medium and long terms remained stable, although above target.
Forecasts for headline inflation were revised downwards for the first two quarters, and then marginally
upwards until the fourth quarter of 2023, due to a slight increase in the trajectory for core inflation. Inflation
is still projected to converge to the 3% target in the third quarter of 2024 (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) pressures on agricultural and livestock product pri ces and
on energy prices due to the ongoing geopolitical conflict; iv) exchange rate depreciation; and v) greater
cost-related pressures. On the downside: i) a greater-than-anticipated slowdown of the world economy;
ii) a decline in the intensity of the geopolitical conflict; iii) a better functioning of supply chains; iv) a lower
pass-through effect from some cost-related pressures; and v) a larger -than-anticipated effect from the
Federal Government’s measures to fight elevated prices. Although some shocks show signs of subsiding,
the balance of risks for the trajectory of inflation within the forecast horizon remains biased to the upside.
The Governing Board evaluated the magnitude and diversity of the shocks that have affected inflation
and its determinants, along with the evolution of medium- and long-term inflation expectations and the
price formation process. It considered the challenges for monetary policy stemming from the ongoing
tightening of global financial conditions, the environment o f uncertainty, the inflationary pressures
accumulated as a result of the pandemic and the geopolitical conflict, the possibility of greater effects on
inflation, and the monetary policy stance already attained in this hiking cycle. Based on these
considerations, the Board decided by majority to raise the target for the overnight interbank interest rate
by 50 percentage points to 10.50%. 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 thoroughly monitor 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 both the orderly and sustained convergence of headline inflation to the 3% target within
the time frame in which monetary policy operates as well as with an adequate adjustment of the economy
and financial markets. The Board considers it will still be necessary to raise the reference rate in its next
monetary policy meeting. Subsequently, it will assess if the reference rate needs to be further adjusted
as well as the pace of adjustments based on the prevailing conditions.
Voting in favor of the decision were Victoria Rodríguez, Galia Borja, Irene Espinosa, and Jonathan Heath.
Gerardo Esquivel voted in favor of raising the target for the overnight interbank interest rate by 25 basis
points to 10.25%.
1/ Forecast starting December 2022.
2/ Forecast starting November 2022. See monetary policy statement of November 10, 2022. Forecast published in the Quarterly Report July-
September 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.
IV I II III IV I II III IV I II III IV
Headline (CPI)
Current (12/15/2022) 1/ 7.0 7.3 7.8 8.5 8.1 7.5 5.9 4.8 4.2 3.8 3.4 3.1 3.0
Previous (11/10/2022) 2/ 7.0 7.3 7.8 8.5 8.3 7.6 5.8 4.7 4.1 3.8 3.4 3.1
Current (12/15/2022) 1/ 5.6 6.5 7.3 8.0 8.5 7.8 6.7 5.5 4.3 3.7 3.2 3.0 3.0
Previous (11/10/2022) 2/ 5.6 6.5 7.3 8.0 8.3 7.5 6.4 5.2 4.1 3.6 3.2 3.0
Annualized seasonally adjusted quartely variation in percent3/
Current - Headline 1/ 8.1 7.0 10.3 8.6 6.4 4.9 3.8 4.0 4.0 3.3 2.4 2.8 3.3
Current - Core1/ 6.5 8.2 8.7 8.6 8.2 5.5 4.5 3.9 3.1 3.1 2.9 2.8 3.0
Forecasts for Headline and Core Inflation
Annual percentage change of quarterly average indices
2022 2023 2024