A series of international conflicts, such as those occurring right now in the Middle East, can generate a second wave of inflation globally, and affect this indicator even in Mexico.
This It would be the second inflationary wave of the decadeafter price rise seen in 2022after the conflict of the Russian invasion of Ukraine began in February of that year.
Now, in the middle of 2024, the tension experienced in the Red Sea is affecting one of the most important maritime routes in world trade, which could cause a ‘shoot’ in inflation, as columnist Víctor Piz explains.
This week in January, the United States and the United Kingdom launched a coordinated attack against targets in Yemen, the poorest Arab country, to damage local militias that have been paralyzing the flow of trade in the Red Sea.
In Yemen, the Houthi rebels began to attack and stop some vessels in that maritime strait, as a protest against Israel.
The Yemeni militiamen had explained that they would paralyze that commercial flow that heads towards Israel as a measure of pressure in the face of the war that escalated again in October in the Gaza Strip, where in just three months the bombings have caused the death of some 23,000 Palestinians, including nearly 10,000 girls and boys.
The attacks launched by Yemen’s militias at sea during the conflict in Gaza can affect at least 10 percent of world trade, Piz highlights in his column this Saturday.
The attacks have caused concern about the obstacles they have posed to the passage of oil and gas, grain and other raw materials through this important artery of global trade.
And there has also been an increase in the costs of international shipments for ships transiting in the area. This is because, since the militia attacks began last November, some 2,000 ships have had to suspend their trips or divert along much longer routes.
Piz highlights that the worsening of geopolitical tensions, in the midst of the war that is breaking out in the Middle East, represents one of the greatest global risks “in terms of the prolongation of inflationary pressures.”
Will the conflict in the Middle East influence inflation in Mexico and the US?
Although the year has just begun, the road will be full of potholes that could directly affect global inflation, so the central banks of Mexico and the United States will have to make decisions as the conflict progresses.
Columnist Víctor Piz recalls that these types of events can have repercussions on the prices of raw materials, especially energy prices.
These types of increases can even reverse the progress that the disinflationary process has had in the United States. In turn, this would lead analysts to reconsider whether the Federal Reserve (Fed) will be able to begin cutting its interest rate.
In the case of Mexico, general inflation rebounded last November and December, and closed the year at an annual rate of 4.7 percent. The Bank of Mexico (Banxico) has set a goal for the indicator to be 3 percent.
