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Banxico Minutes Of The May 12 Meeting Released

MEXICO
  • Link to Banxico minutes: https://www.banxico.org.mx/publications-and-press/minutes-of-the-board-of-governors-meetings-regardi/%7B8C8D624F-0776-EC50-1E12-CF81B85A615B%7D.pdf
  • Discussions Evident Of Bolder Action By Board Members Aside From Espinosa
  • One member “pointed out that raising the rate by 75 basis points would send a stronger message of commitment to the central bank’s primary objective.”
  • "This measure would further dissipate any doubts regarding central bank autonomy, and would restate the institution’s moral obligation with the most vulnerable population. Moreover, this would imply reaching the neutral zone more rapidly, would help to offset the deterioration of medium-term expectations, would have a greater effect on anchoring long-term expectations, and would provide a stronger relative monetary policy stance to face increases in risk aversion.”
    • “However, he/she noted that it would surprise both markets and analysts, making it difficult to forecast the reference rate’s trajectory and distorting the interpretation of the reaction function.”
  • Another member (likely Espinosa) “considered that monetary policy has fallen "behind the curve" and that, in the current situation, a 50 basis-point increase is insufficient to guarantee the convergence of inflation within the forecast horizon. Also, the key role of monetary policy is to act decisively and in a timely manner to curb inflationary inertia and avoid more severe rate increases in the future, and for this reason he/she pointed out that it is time to raise the rate of adjustment of monetary policy by 75 basis points.”
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  • Link to Banxico minutes: https://www.banxico.org.mx/publications-and-press/minutes-of-the-board-of-governors-meetings-regardi/%7B8C8D624F-0776-EC50-1E12-CF81B85A615B%7D.pdf
  • Discussions Evident Of Bolder Action By Board Members Aside From Espinosa
  • One member “pointed out that raising the rate by 75 basis points would send a stronger message of commitment to the central bank’s primary objective.”
  • "This measure would further dissipate any doubts regarding central bank autonomy, and would restate the institution’s moral obligation with the most vulnerable population. Moreover, this would imply reaching the neutral zone more rapidly, would help to offset the deterioration of medium-term expectations, would have a greater effect on anchoring long-term expectations, and would provide a stronger relative monetary policy stance to face increases in risk aversion.”
    • “However, he/she noted that it would surprise both markets and analysts, making it difficult to forecast the reference rate’s trajectory and distorting the interpretation of the reaction function.”
  • Another member (likely Espinosa) “considered that monetary policy has fallen "behind the curve" and that, in the current situation, a 50 basis-point increase is insufficient to guarantee the convergence of inflation within the forecast horizon. Also, the key role of monetary policy is to act decisively and in a timely manner to curb inflationary inertia and avoid more severe rate increases in the future, and for this reason he/she pointed out that it is time to raise the rate of adjustment of monetary policy by 75 basis points.”