After financial panic broke out in world markets on Monday due to the possibility that the United States could enter an economic recession, the Bank of Mexico (Banxico) has yet to discuss various factors concerning its monetary policy: What are they?
This nervousness began last Friday, August 2, after the publication of employment and industrial activity data in the United States.
According to Enrique Quintana, columnist for The financialin his text Financial Panic: Origin and Consequences, indicated that the rise in rates in Japan, the poor employment data in the United States and the increase in tensions in the Middle East were some of the factors that left a terrain of open instability in the world markets.
“As almost always happens when market turbulence breaks out, The peso was the great victim in the Mexican marketbecause the stock market fall was much more moderate in our country than in other latitudes,” he commented.
Quintana explains that on this occasion, the weakening of the peso against the dollar was caused by external factors; however, he assured that after these events it does not mean that it cannot be pushed by internal factors in the near future.
“The Market sensitivity has grown And now we will see an environment in which almost any variable that indicates economic weakness or geopolitical tension can again produce turbulence. This circumstance will create A complex scenario for the Governing Board from the Bank of Mexico,” the columnist added.
What factors will influence Banxico’s decision on Thursday, August 8?
However, the economist also pointed out that it will not be until next Thursday, August 8, that his decision regarding Mexico’s monetary policy must be announced, “after the weakness of the Mexican economy became evident”.
“Although the weakness of the Mexican economy, which was again evident yesterday in the poor generation of formal employment in the month of July, could be a favorable argument for reducing rates, as well as the slight but consistent reduction in underlying inflation, it turns out that this global picture with an exchange rate that rose more than 3 pesos compared to the minimum levels of not many weeks ago, offers a picture that could to discourage the Central Bank from resuming the downward cycle of the rates,” he said.
The argument that the Mexican economy is weak comes after President Andrés Manuel López Obrador assured this Monday, August 5, that the national economy is strong in the face of the collapse of the stock markets and the peso.
The federal president even stressed that the country has a “margin of protection” because there are millions of dollars in Banxico’s reserves.
The Bank of Mexico reported that the balance of the international reserve was 221.725 billion dollars as of July 26, which meant a weekly increase of 104 million dollars and an accumulated growth, compared to the end of 2023, of 8,963 million dollars.
In this regard, Quintana regretted that “there is really no guarantee that this will be enough to avoid the effects of international turbulence, especially with the challenges that exist to reduce the deficit in 2025.”
