Banxico Monetary Policy Statement - 2021-12-16
Central bank: banxico | Type: decision | Date: 2021-12-16

December 16, 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 50 basis points to 5.5%, effective December 17, 2021.
Available information shows that world economic growth has increased moderately during the fourth
quarter, heterogeneously across countries depending on the evolution of the pandemic and the actions
implemented by their public health, monetary and fiscal authorities. World inflation continued increasing
due to pressures originated by bottlenecks in production, the reallocation of spending towards
merchandise, the rise in food and energy prices, and the recovery of certain services. In the United
States, the Federal Reserve announced an acceleration of the removal of monetary stimulus, doubling
the pace of reduction of its net asset purchases , and outlining projections for the federal funds rate for
2022 and 2023 with higher increases than expected. Many emerging market economies intensified their
respective reference rate increases . 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 depreciated, while m edium- and long -term interest rates
increased influenced by external conditions. Information up to October shows a recovery of economic
activity, after the contraction observed during the third quarter. An environment of uncertainty continues
and slack conditions are anticipated, with significant differences across sectors.
Global and domestic inflationary pressures continue affecting annual headline and core inflation, which
in November registered 7.37% and 5.67 %, respectively. Headline and core inflati on expectations for
2021, 2022, and for the next 12 months, increased again, as well as medium-term expectations, while
those for longer terms have remained stable at levels above the target.
Headline and core inflation forecasts were once again revised upwards, especially for 2022 (see table).
Their annual variations are expected to decrease to a larger extent after one year, 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 at high levels; 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 further and remains biased to the upside.
The Governing Board evaluated the magnitude and diversity of the shocks that have affected inflation
and the factors that determine it, along with the risk of price formation becoming contaminated, and the
challenges posed by the ongoing tightening of monetary and financial global conditions. Based on these
considerations, on this occasion, the Board decided to increase the target for the overnight interbank
interest rate by 50 basis points to 5.5%. With this action, the monetary policy stance adjusts to the
trajectory required for inflation to converge to its 3% target within the forecast horizon
For the next monetary policy decisions, the Board will monitor thoroughly the behavior of inflationary
pressures as well as of all factors that have an incidence on the foreseen path for inflation and its
expectations. The latter, in order to determine 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 increasing the target for the overnight interbank interest rate by 25 basis points
to 5.25% was Gerardo Esquivel.
1/ Observed figures up to November 2021 and forecast starting December 2021.
2/ Forecast starting November 2021. See press release of November 11, 2021. Forecast presented in the Quarterly Report July -September 2021.
3/ See methodological note on the seasonal adjustment process.
Source: INEGI for observed figures and Banco de México for seasonally adjusted figures and forecast.
Note: Shaded areas correspond to observed figures.
I II III IV I II III IV I II III IV
Current (December 16, 2021)1/ 4.0 6.0 5.8 7.1 6.7 5.1 4.3 3.5 3.3 3.2 3.1 3.0
Previous (November 11, 2021) 2/ 4.0 6.0 5.8 6.8 6.3 4.8 3.9 3.3 3.2 3.2 3.1
Current (December 16, 2021)1/ 3.9 4.4 4.8 5.6 6.2 5.8 4.9 4.1 3.3 2.9 2.8 2.7
Previous (November 11, 2021) 2/ 3.9 4.4 4.8 5.5 5.8 5.3 4.3 3.5 3.0 2.7 2.6
Annualized seasonally adjusted quarterly variation in percent 3/
Current - CPI 1/ 5.7 9.3 6.3 7.0 4.1 2.9 3.2 3.9 3.1 2.4 3.0 3.4
Current - Core 1/ 3.9 5.6 6.6 6.3 6.2 4.1 3.1 3.2 2.8 2.6 2.5 2.7
Forecasts for Headline and Core Inflation
Annual percentage change of quarterly average indices
2021 2022 2023