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After inflation registered a rebound during the first half of October, going from 4.5% a 4.69%, Financial specialists project an uncertain outlook for the rest of the year.
An analysis of Alejandro Saldana of the banco Bx+recorded that high volatility can close the market’s room for maneuver Bank of Mexico to continue with the cuts.
“However, the Governing Board has taken a more permissive stance on inflation and issued looser future guidance in its latest monetary policy announcement. Furthermore, the Fed (Federal Reserve) began its cycle of lowering the federal funds target with an adjustment of 50 basis points.”
He projected that the Bank of Mexico may announce a cut in 25 basis points in its November decision.
In this period, the inflation According to economic analysts, it reflected the end of the special electricity rate program for the summer, with which a price increase in the second half of September once again boosted the energy sector, where support for electricity ended in 18 cities. after the end of the warm season in Mexico. “The rebound in some fruits and vegetables (tomato, green tomato, zucchini, papaya and cactus) and in air transport services also stood out.”
Saldaña highlighted that the fruits and vegetables accelerated, despite the fact that they had six previous readings downward.
“This was due to the reacceleration in the non-core index, particularly in agricultural products, which eclipsed the less dynamism in energy”.
A report of Ivan Arias, analyst Citibanbamex, explained that inflation in the first half of October was 0.43% and the annual rate reached 4.69%.
“The increase was driven by the rise in prices in some fruits and vegetables, and by the seasonal increase in electricity rates”, agreed.
“We maintain our estimates for annual and underlying general inflation at the end of 2024 at 4.4% y 4.0%respectively, and by 2025 at 3.9% and 3.8%.”
He added that higher prices of tomatoes and other agricultural products influenced the annual non-core to 7.2%. Agriculture, he said, grew up to 70%.
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Time.news Editor: Welcome to Time.news, where we delve into the crucial economic issues affecting our world today. Joining us is Alejandro Saldana from Banco Bx+, a leading expert on monetary policy and inflation trends. Welcome, Alejandro!
Alejandro Saldana: Thank you for having me. It’s a pleasure to discuss these important topics.
Time.news Editor: Let’s jump right in. We’ve seen inflation recently rebound from 4.5% to 4.69%. What do you attribute this increase to, and what does it mean for consumers and the economy overall?
Alejandro Saldana: The increase in inflation can be attributed to several factors, including supply chain disruptions and fluctuating energy prices, which have been ongoing challenges. For consumers, this rise means that purchasing power is eroded, which can affect spending habits and overall economic confidence.
Time.news Editor: That makes sense. You mentioned the high volatility in the market; how does this impact the Bank of Mexico’s ability to manage interest rates and make cuts?
Alejandro Saldana: High market volatility limits the Bank of Mexico’s room for maneuver. In periods of uncertainty, policymakers tend to be cautious, as drastic changes in monetary policy can exacerbate volatility or create unforeseen consequences. However, I believe the Governing Board has taken a more permissive stance recently, which indicates a willingness to act more swiftly if needed.
Time.news Editor: Speaking of the Governing Board, you pointed out that they issued looser future guidance in their last monetary announcement. What does that imply for future economic policy?
Alejandro Saldana: Looser future guidance suggests that the Bank is ready to adopt a more flexible approach to interest rates as conditions evolve. Specifically, with the Fed’s recent move to lower the federal funds target by 50 basis points, there’s a possibility that the Bank of Mexico could follow suit. My projection is that we may see a 25 basis point cut in its upcoming decision in November.
Time.news Editor: That’s a bold prediction! How do you think such a cut would play out in the short term for the economy?
Alejandro Saldana: If the Bank of Mexico implements a cut, it could provide some relief to consumers and businesses by reducing borrowing costs. This could encourage spending and investment, which are crucial for economic growth. However, there’s also the risk that if inflation remains high, it could cause further instability, making the situation more complex.
Time.news Editor: Certainly a balancing act. Given these uncertainties, what advice would you give to businesses and investors trying to navigate this economic landscape?
Alejandro Saldana: I would advise businesses to maintain a close watch on market conditions and be prepared to adjust their strategies accordingly. Flexibility is essential in this environment. For investors, diversifying portfolios and considering inflation-hedged assets might be wise moves to cushion against potential downturns.
Time.news Editor: Thank you for your valuable insights, Alejandro. As we navigate these uncertain economic waters, expertise like yours helps pave the way for informed decisions. We appreciate your time today.
Alejandro Saldana: Thank you for having me! I look forward to seeing how these developments unfold.
Time.news Editor: And thank you to our audience for tuning in. Stay informed with Time.news for more updates on global economic trends.