Mexico achieved in June the second-lowest variation in inflation among the largest countries in Latin America, of 5.06%, but remains far from the stability objective, set by the Bank of Mexico at 3%.
With the lowest fluctuation and already meeting the stability objective that its central bank has, Brazil registered 3% in its annual inflation reading during June.
The director for Latin America at the Moody’s Analytics consultancy, Alfredo Coutiño, commented that the Bank of Brazil now stands out as the only one on the continent that brought inflation to the target, which in this case is 3.25 percent.
The Brazilian central bank, led by Governor Roberto de Oliveira Campos Neto, applied a two-component strategy: a precise diagnosis of the nature of inflation and a strict monetary program, with no room for hesitation, Coutiño explained in an interview.
The Bank of Brazil applied an upward rate policy for 18 months, from March 2021 to August 2022, and from then on it went on pause and left the rate at 13.75 percent.
In fact, the pause in the Selic rate, the reference rate, will be 11 months old this July.
The Bank of Brazil was the first to increase the rate in the global restrictive policy episode since March 2021. This first increase was three-quarters of a point, the most pronounced at the beginning of the restrictive cycle of global rates, and the first of 12 consecutive increments.
Brazil’s bullish cycle accumulated an increase of 1,375 base points in the rate and included a pause in the upward trajectory that has been going on for 11 months.
Coutiño highlighted the Mexican case, which was the second in the region to start the upward cycle of the rate in June 2021. After 24 months of applying a restrictive policy, inflation stands at 5.2 percent.
“What is needed for the Bank of Mexico is to maintain the hawkish financial conditions for the long term, as the Bank of Mexico has made clear, to return expectations to lower levels and help lower underlying expectations,” he stressed.
underlying resistance
Core inflation is the indicator that discounts the most volatile prices in the economy; it is the purest part of inflation, and it is the key factor for the monetary decisions of central banks. and it has become the focus of the risk of disinflation. This has been explained by the leaders of the International Monetary Fund (IMF) and the Bank for International Settlements (BIS).
The Managing Director of the IMF, Kristalina Georgieva, warned this week in an institutional blog that core inflation remains far from the levels set as targets by central banks.
While the General Director of the BIS, Agustn Carstens, explained two weeks ago, that “the advances achieved so far in the fight against inflation are due, to a large extent, to the relaxation of the chains of supply and falling prices of raw materials.”
But the resilience of global core inflation does not seem to reflect this easing of supply chain tensions.
Mexico registered a 6.98% annual fluctuation in core inflation in June, which posted a fifth downward monthly reading but is more than double the punctual inflation target set by Banco de México at 3 percent.
