Experts Warn of Persistent Inflation Pressure
The economist chief for Latin America at Citi, Ernesto Revilla, has expressed concerns about the Banco de México’s (Mexico’s central bank) credibility. According to Revilla, this 2026 will mark the sixth consecutive year that inflation has remained outside the target range, creating a yellow flag for the economy.
Bank of America’s Carlos Capistrán Shares Similar Concerns
Carlos Capistrán, the economist chief for Mexico and Latin America at Bank of America, echoes Revilla’s concerns. Capistrán clarifies that the market now understands the inflation target to be 3% ±1 percentage point. This means that inflation can range between 3.70% and 4%, yet the Banco de México can still continue to reduce interest rates.
Previously, Capistrán explains, the Banco de México’s objective was considered to be a precise 3% with a variability range. Today, however, the variability range is considered part of the objective.
Key Factors Driving Inflation Pressure
During the annual Perspectivas Económicas seminar organized by ITAM, both Revilla and Capistran agreed on several factors contributing to persistent inflation pressure:
- Increase in Minimum Wage: The recent rise in the minimum wage is adding to inflationary pressures.
- Persistent Pressure on Service Prices: The consistent upward trend in service prices continues to fuel inflation.
- World Cup Football Impact: The upcoming World Cup of Football is expected to introduce additional tension, keeping inflation around 4% throughout the year.
Key Questions and Answers
- What is the concern regarding Banco de México’s credibility? Both Citi and Bank of America experts are worried that the central bank has lost some credibility due to inflation consistently staying outside its target range for six consecutive years.
- What is the current inflation target according to experts? The inflation target, as per Capistrán, is 3% with a tolerance of ±1 percentage point.
- What factors are driving inflation pressure in Mexico? The key factors include the recent increase in minimum wage, persistent pressure on service prices, and the upcoming World Cup of Football.
