In June, headline inflation was 4.98%, driven by non-core inflation, which stood at 7.67% due to the increase in agricultural prices.
Non-core inflation measures the behavior of agricultural and energy prices, volatile prices where experts say monetary policy is having no effect.
But on Friday, Heath said on his X account that if this component of inflation is underestimated, there is a risk that prices will become contaminated.
“Although it basically comprises prices that are not susceptible to monetary policy, they can contaminate other prices in the economy. How can we avoid such contamination? By maintaining a restrictive stance,” he posted.
In the minutes of the monetary policy decision published on Thursday, it was revealed that Deputy Governor Omar Mejía believes that the evolution of non-core inflation should not be overemphasized.
Deputy Governor Mejía argued that the rate level has little impact on this type of inflation.
It is important not to underestimate the role of non-core inflation. Although it basically comprises prices that are not susceptible to monetary policy, it can contaminate other prices in the economy. How can we avoid such contamination? By maintaining a restrictive stance.
— Jonathan Heath (@JonathanHeath54)
July 12, 2024
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