Banxico Monetary Policy Statement - 2021-08-12
Central bank: banxico | Type: decision | Date: 2021-08-12

August 12, 2021
Banco de México’s Governing Board decided to increase the target for the overnight interbank
interest rate by 25 basis points to 4.50%, effective August 13, 2021.
Global economic activity continued to recover heterogeneously across countries, associated with vaccine
availability, the evolution of the pandemic, and stimulus spending. Global inflation continued increasing
significantly due to pressures on commodity prices, base effects, and multiple bottlenecks in production.
The central banks o f advanced economies have maintained the monetary stimulus -although in some
cases they are already expecting to diminish it- while in emerging economies several of them have
reduce it. Among key global risks are those associated with the pandemic and inflationary pressures, as
well as with monetary and financial conditions.
Domestic financial markets have exhibited exchange rate stability and interest rate increases, particularly
for shorter terms. The recovery of the Mexican economy continued during the second quarter and is
expected to endure for the rest of the year, while risks related to the growing number of infections persist.
Although the pandemic has complicated the assessment of the economy, slack conditions are
anticipated, with significant differences across sectors.
Global inflation along with adverse effects on supply chains and productive processes of several goods
and services generated pressures on headline and core inflation, which in July registered annual rates
of 5.81% and 4.66%, respectively. Headline and core inflation expectations for 2021 increased again and
those for the medium and long terms remained relatively stable at levels above the target.
The revised forecasts for headline and core inflation are above those published in the last Quarterly
Report (see table). Considering the nature of the shocks that have affected them , the larger increases
correspond to the short term. Annual headline and core inflation projections are expected to decrease,
particularly for horizons of one year and beyond, and to converge to the 3% target during the first quarter
of 2023. These forecasts are subject to risks and additional shocks. 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. On the downside: i) effects stemming from the
negative output gap; ii) additional social distancing; and iii) exchange rate appreciation. The balance of
risks for the trajectory of inflation within the forecast horizon is biased to the upside.
Although the shocks that have increased inflation are expected to be transitory, due to their variety,
magnitude, and the extended horizon over which they have affected it, they may pose risks to the price
formation process. For this reason, it was deemed necessary to strengthen the monetary policy stance
in order to avoid adverse effects on inflation expectations and enable an orderly adjustment of relative
prices and the convergence of inflation to the 3% target. The Governing Board decided to increase the
target for the overnight interbank interest rate by 25 basis points to 4.5%.
For the next monetary policy decisions, the Governing Board will assess the factors that have an
incidence on inflation, on its foreseen trajectory within the forecast horizon, and on its expectations. This,
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 , and enable an
adequate adjustment of the economy and financial markets.
Voting in favor of the decision were Alejandro Díaz de León, Irene Espinosa, and Jonathan Heath. Voting
in favor of leaving the target for the overnight interbank interest rate unchanged at 4.25 % were Galia
Borja and Gerardo Esquivel.
I II III IV I II III IV I II
Current (08/12/2021) 1/ 4.0 6.0 5.6 5.7 5.2 3.9 3.2 3.4 3.1 3.1
Previous (06/02/2021) 2/ 4.0 5.8 4.5 4.8 4.3 3.0 3.1 3.1 2.9
Current (08/12/2021) 1/ 3.9 4.4 4.7 5.0 5.1 4.4 3.6 3.3 3.1 3.0
Previous (06/02/2021) 2/ 3.9 4.3 3.9 3.9 3.9 3.3 3.2 3.2 3.2
Note: the shaded area corresponds to observed figures.
Source: INEGI for observed figures and Banco de México for forecasts.
Forecasts for Headline and Core Inflation
Annual percentage change
2021 2022 2023
1/ Forecasts as of August 2021.
2/ Forecasts as of May 2021. Quarterly Report January - March 2021.