Inflation risks in Mexico remain on rise, says central bank

The balance of risks due to inflation in Mexico remains on the rise, amid an outlook in which the world's main economies face expectations of an acceleration in prices in the short term, the central bank of Mexico (Banxico) said Thursday.

In the minutes of the bank's Feb. 10 monetary policy meeting, the five members of Banxico's Governing Board stressed that local inflation expectations for 2022 and 2023 rose again.

Some pointed to external inflationary pressures as sources of acceleration, such as exchange rate depreciation and hikes in energy prices.

Most mentioned that global inflation continued to rise, driven by bottlenecks in production, the recomposition of consumption toward merchandise and the high prices of raw materials, according to the minutes.

Given the acceleration in prices, interest rates worldwide have risen, especially in advanced economies, which poses risks for financial markets, Banxico added.

Global economic activity, however, continues to recover, although at a slower pace, with differences between countries and sectors compared to previous months due to the evolution of the novel coronavirus.

The uptick in infections globally has caused new restrictions in several countries, affecting global supply chains.

In the case of Mexico, the recovery of the local economy continues to be heterogeneous between sectors, the bank said.

Mexico's economy, the second largest in Latin America after Brazil, grew by 4.8 percent in 2021, after plunging 8.2 percent the previous year due to the COVID-19 pandemic, according to preliminary official figures. ■