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Mexico central bank deputy governor disagrees with monetary policy statement


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According to Market Intelligence, April 2023

Mexico central bank deputy governor disagrees with monetary policy statement

The deputy governor of Banco de México, Gerardo Esquivel Hernández voted against the statement issued by the entity where the body maintained the reference rate at 8.25%, due to its restrictive tone and its conclusion on the balance of risks for inflation.

Nevertheless, the official did vote for the decision to hold the rate steady. "Although I agreed with the decision to keep the objective for the interbank interest rate unchanged, I do not agree with the statement that explains the decision," Esquivel Hernández said, notes from a May 16 board meeting at the central bank show.

The deputy governor said inflation in 2019 had behaved better than expected last year and therefore he could not agree with the board's warnings of accelerating inflation. Esquivel Hernández also said he disagreed with the perceived inflationary risk of raising the minimum salary in Mexico, as the statement emphasized. On the contrary, no evidence showed that inflation was on the rise because of the salary rise, five months after it was implemented.

"I believe that the recent change in the monetary stance of several developed countries, as well as the marked slowdown in the country's economic activity, allowed for a more neutral statement to be issued," he said.

On May 16, the regulator said it was maintaining the key rate at 8.25% despite observing a faster pace of inflation in the past months.

The statement also noted that headline inflation rose to 4.41% between March and April, with inflation expectations increasing for both the short and medium terms.

Despite a rise in inflation, the central bank considers the developments "transitory" and still expects to achieve its 3% inflation target.