Inflation spiked in October due to the increase in food prices such as electricity, tomatoes, green tomatoes, papaya and housing. The increase in electricity rates responded to a seasonal effect: the end of the warm season program in 18 cities in the country.
Alejandro Saldaña, chief economist of Ve por Más (Bx+), said in an interview with Expansion that if the increases in non-core inflation continue between now and the end of the year, there could be concerns in the management of monetary policy.
“Banco de México had said that these phenomena were temporary, that they were going to dissipate quickly. So, if this becomes a constant in the coming months, it will be a worrying situation because Banco de México, with the assumption that it was going to Although this phenomenon was temporary, it began to lower interest rates or justified initiating cuts in interest rates,” said Saldaña.
The Bank of Mexico said last July that the increase in prices of fruits and vegetables that was recorded in previous months would be temporary and that this component of non-core inflation – which measures volatile products – would not impact general inflation.
Non-core inflation had its highest rate in July of this year, at 10.36%, the highest in two years, and in the following months it has decreased, but still above the historical average.
Given the slowdown in general inflation that was recorded in July and August, Banxico justified the interest rate cuts and argued that it could take inflation up to 4.3% in the last quarter of the year, a figure with which analysts they don’t agree.
In the October inflation data there was good news on inflation, although that has negative implications: services broke the 5% floor and had their lowest level since July 2022.
For Saldaña, the reduction in service inflation is due to low economic growth and he warned that the challenge in the following months will be increases in the minimum wage.
“The level of the current minimum wage is a different factor than what we had a few years ago, because as the average wage is getting closer and closer, that means that there is a lighthouse effect or the contamination that adjustments to the minimum wage can have on the rest of the salaries in the economy, because it is increasingly higher,” explained Saldaña.
The economist pointed out that after an inflationary period as aggressive as last year, inflation expectations have deteriorated.
“I am concerned that expectations have deteriorated, distorted, and have become anchored at a level higher than the Bank of Mexico’s goal, and that this prevents or causes underlying inflation not to fall much further than current levels,” he said. .
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