Banxico Monetary Policy Statement - 2021-11-11
Central bank: banxico | Type: decision | Date: 2021-11-11

November 11, 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 5%, effective November 12, 2021.
World economic activity continued to recover during the third quarter , although at a slower pace and
heterogeneously across countries , associated with the evolution of the pandemic and with spending
programs. Global inflation continued increasing due to pressures originated by bottlenecks in production,
stimulus spending and its reallocation towards merchandise, the rise in food and energy prices, and the
reopening of certain services. In the United States, the Federal Reserve announced the reduction in its
asset-purchase program, and the central banks of other advanced economies are expected to begin
withdrawing the monetary stimulus, while a large number of emerging market 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 peso exchange rate exhibited volatility and depreciated slightly, short-
term interest rates increased , and long -term ones were influenced by external conditions. Preliminary
information indi cates that the Mexican economy contracted during the third quarter, although it is
expected to resume its recovery starting in the fourth quarter. An environment of uncertainty persists and
slack conditions are anticipated, with significant differences across sectors.
Global and domestic inflationary pressures continue affecting annual headline and core inflation, which
in October registered 6.24% and 5.19%, respectively. Headline and core inflation expectations for 2021,
for the next 12 months, and for 2022, increased again, while those for longer terms have remained stable
at levels above the target.
Headline and core inflation forecasts were revised upwards , especially shorter -term ones (see table).
Their annual variations are expected to decrease, particularly for one year and beyond, and converge to
the 3% target by the end of the forecast horizon. These projections 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 and in energy prices. On the
downside: i) a widening of the negative output gap; ii) social distancing measures; and iii) exchange rate
appreciation. The balance of risks for the trajectory of inflation within the forecast horizon deteriorated
and remains biased to the upside.
The shocks that have increased inflation are largely considered to be transitory. Nevertheless, the
horizon in which they could affect it is unknown, and they have involved a wide range of products, while
being of considerable magnitude. This poses greater risks to the price formation process and to inflation
expectations. For this reason, it was deemed necessary to continue reinforcing the monetary policy
stance, 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 5%.
For the next monetary policy decisions, the Governing Board will assess thoroughly the behavior of
inflationary pressures as well as of all factors that have an incidence on the foreseen trajectory for inflation
and its expectations . The latter , in order to adopt 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.
Voting in favor of the decision were Alejandro Díaz de León, Galia Borja, Irene Espinosa, and Jonathan
Heath. Voting in favor of leaving the target for the overnight interbank interest rate unchanged at 4.75%
was Gerardo Esquivel.
I II III IV I II III IV I II III
Current (11/11/2021)1/ 4.0 6.0 5.8 6.8 6.3 4.8 3.9 3.3 3.2 3.2 3.1
Previous (09/30/2021)2/ 4.0 6.0 5.8 6.2 5.6 4.3 3.5 3.4 3.3 3.2 3.1
Current (11/11/2021)1/ 3.9 4.4 4.8 5.5 5.8 5.3 4.3 3.5 3.0 2.7 2.6
Previous (09/30/2021)2/ 3.9 4.4 4.8 5.3 5.4 4.8 4.0 3.4 3.1 2.9 2.8
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 November 2021.
2/ Forecast as of September 2021. See press release of September 30,2021.