Banxico Monetary Policy Statement - 2022-03-24
Central bank: banxico | Type: decision | Date: 2022-03-24

March 24, 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 basis points to 6.5%, effective March 25, 2022.
Available indicators suggest a moderation in global economic activity during the first quarter of 2022 .
World inflation continued increasing due to pressures originated by bottlenecks in production and to the
high levels of food and energy prices. This environment has generated expectations of a faster
withdrawal of monetary stimulus worldwide. Financial conditions tightened, with an increase in interest
rates and a stronger US dollar, in a context of higher risk aversion associated with the recent geopolitical
conflict. In its latest monetary policy decision, the Federal Reserve raised the target range for the federal
funds rate by 25 basis points and announced that it expects to continue increasing it in the remaining
meetings of 2022, although it pointed out that it will calibrate the pace of monetary policy adjustments if
it foresees risks that may jeopardize the attainment of its goals . Many emerging market economies
continued increasing their reference rates. Among key global risks are those associated wit h the
pandemic, longer-lasting inflationary pressures, the intensification of geopolitical turmoil, and greater
adjustments in monetary and financial conditions.
In domestic financial markets, the peso slightly appreciated albeit registering some episodes of volatility,
while interest rates increased accordingly to global developments. Available indicators suggest that the
Mexican economy might have resumed its recovery during early 2022 . An environment of uncertainty
and ample slack conditions prevails, although the latter are expected to be less ample than in the previous
quarter.
In addition to the shocks that have affected inflation throughout the health emergency there are pressures
associated with the geopoliti cal conflict. During the first fortnight of March , headline and core inflation
registered annual variations of 7.29% and 6. 68%, respectively, while their expectations for 2022 and
2023 increased again . Medium-term expectations for headline inflation were r evised upwards at the
margin, while those for core inflation were left unchanged and longer-term expectations have remained
stable at levels above the target.
Given the greater inflation pressures, forecasts for headline and core inflation were revised significantly
upwards for the entire horizon and convergence to the 3% target is now expected to be attained in the
first 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) increases
in agricultural and livestock product prices and in energy prices due to the recent geopolitical conflict; iv)
exchange rate depreciation; and v) cost-related pressures. On the downside: i) a decline in the intensity
of the war conflict; ii) a greater-than-expected effect from the negative output gap; iii) energy prices below
those anticipated; and iv) exchange rate appreciation. The balance of risks for the trajectory of inflation
within the forecast horizon has deteriorated and remains biased to the upside.
The Governing Board evaluated the magnitude and diversity of the sho cks that have affected inflation
and the factors that determine it, along with the risk of medium- and long-term inflation expectations and
price formation becoming contaminated. It also considered the challenges posed by the ongoing
tightening of global monetary and financial conditions, and the environment of significant uncertainty and
greater inflationary pressures associated with the geopolitical conflict. Based on these considerations ,
and with the presence of all its members, the Board decided unanimously to raise the target for the
overnight interbank interest rate by 50 basis points to 6.5%. 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 take the necessary actions to avoid the price formation process from
becoming contaminated, and set 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 t ime
frame in which monetary policy operates as well as an adequate adjustment of the economy and financial
markets.
1/ Forecast starting March 2022.
2/ Forecast starting February 2022. See monetary policy statement of February 10, 2022. Forecast included in the Quarterly Report 4-2021.
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.
I II III IV I II III IV I II III IV I
Current (03/24/2022) 1/ 4.0 6.0 5.8 7.0 7.2 6.9 6.1 5.5 4.5 3.4 3.2 3.2 3.1
Previous (02/10/2022) 2/ 4.0 6.0 5.8 7.0 6.9 5.4 4.6 4.0 3.4 3.2 3.1 3.1
Current (03/24/2022) 1/ 3.9 4.4 4.8 5.6 6.5 6.7 5.9 5.2 4.1 3.4 3.1 3.1 3.0
Previous (02/10/2022) 2/ 3.9 4.4 4.8 5.6 6.4 6.1 5.1 4.3 3.3 2.9 2.7 2.7
Annualized seasonally adjusted quarterly variation in percent3/
Current - CPI 1/ 5.8 8.7 6.5 7.0 6.9 7.0 3.7 4.4 3.0 2.5 3.2 4.0 2.8
Current - Core1/ 3.9 5.3 6.7 6.6 7.5 5.8 3.7 3.8 3.1 3.0 2.8 3.4 2.7
Forecasts for Headline and Core Inflation
Annual percentage change of quarterly average indices
2021 2022 2023