Banxico Monetary Policy Statement - 2021-05-13
Central bank: banxico | Type: decision | Date: 2021-05-13

May 13, 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 is the only official document.
Banco de México’s Governing Board decided to maintain the target for the overnight interbank
interest rate at 4.00%.
Global economic activity continues to recover heterogeneously across countries associated with vaccine
availability and the amount of stimulus spendin g. Financial markets exhibited a more stable behavior.
Global inflation increased, reflecting recent pressures from commodity prices, especially energy-related,
as well as from comparison-base effects and some cost-related pressures. In most advanced economies,
headline and core inflation remain at low levels and their central banks reiterated that they will maintain
accommodative monetary policy stances. Among the most relevant global risks are those associated
with the pandemic and a greater-than-expected increase in inflation.
Since the last monetary policy decision, the Mexican peso appreciated slightly, shorter-term interest rates
increased and longer-term ones fluctuated in a narrow range. Although the economic recovery slowed
during the first quarter, higher growth is expected for the rest of the year, with a more equilibrated balance
of risks. Nevertheless, ample slack conditions are foreseen for the economy as a whole, with significant
differences across sectors.
Annual headline inflation was affected by the abovementioned factors and increased more than
anticipated, reaching 6.08% in April, while core inflation and non- core inflation registered 4.13% and
12.34%, respectively. Inflation expectations for 2021 rose and those for the medium and long terms
remained stable at levels above the 3% target.
The revised forecasts for headline and core inflation display short-term levels above those published in
the last Quarterly Report. Nevertheless, both are still expected to converge to the 3% target starting in
the second quarter of 2022. These forecasts are subject to risks. On the upside: i) external inflationary
pressures; ii) cost-related pressures or a reallocation of spending; iii) persistence of core inflation; and
iv) exchange rate depreciation. On the downside: i) effects stemming from the negative output gap; ii)
greater social distancing measures; and iii) foreign exc hange appreciation. The balance of risks that
might affect the anticipated path for inflation within the forecast horizon is biased to the upside.
In a highly uncertain environment, the risks for inflation, economic activity and financial markets pose
major challenges for monetary policy. Given the recent shocks that have affected inflation, it is necessary
for the adjustment in relative prices to ta ke place in an orderly manner so that an impact on price
formation and inflation expectations is avoided. With the presence of all its members, the Governing
Board decided unanimously to maintain the target for the overnight interbank interest rate at 4.00%. This,
considering the abovementioned inflation forecasts, the risks they are subject to, as well as the need to
consolidate a downward trajectory for headline and core inflation to the 3% target . Looking ahead,
monetary policy implementation will depend on the evolution of the factors that have an incidence on
inflation, on its foreseen trajectories within the forecast horizon, and on its expectations.
The Governing Board will take the necessary actions based on incoming information in order for the
policy rate to be consistent with the orderly and sustained convergence of headline inflation to the 3%
target within the time frame in which monetary policy operates. It is necessary to safeguard the
institutional framework, strengthen the macroeconomic fundamentals and adopt the necessary actions
on both monetary and fiscal policy fronts, to enable a better adjustment of domestic financial markets
and of the economy as a whole.