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Recessions occur because the Fed's short-term interest rates determine the level of all rates in the economy: the Fed's rate hike implies higher rates for credit to companies, for mortgage loans and for consumer loans, etc.
Banxico raised the policy rate by 75bp to 7.75% and signaled that another hike of this size was possible at its next meeting, but also that a larger hike was unlikely
June 22, 2022
Banxico will act “more forcefully” and deliver, a widely anticipated, larger 75bp hike
There is (now) a wide consensus that Banxico will match Fed’s expected hikes through December, taking the policy rate to 9.50% by year-end
June 21, 2022
Mexico | The financial system shows resilience in the face of the current risk scenario
In addition to the remaining effects of the pandemic, challenges associated with the geopolitical conflict between Russia and Ukraine, global inflationary pressures and the tightening of financial conditions worsen the current risk scenario.
Due to slowing growth and high inflation rates around the world, the World Bank raised concerns about global stagflation. Considering this scenario plus a possible fifth wave of COVID-19, some implications for the population in poverty are analyzed in a press release.
The growth of employment, and consequently the low levels of unemployment, have made it possible to increase the total wage bill, which is currently 3.0% above the pre-pandemic level; however, this gain has been due to the generation of low-paid jobs and the loss of employment of more than 2 Minimum Wages (MW)
At the time of writing this article, the exchange rate is 19.5 pesos per dollar; a remarkable level considering that just last November its value was 21.9 pesos per dollar (an appreciation of more than 10%).
In April 2022, the balance of traditional bank deposits exhibited a real YoY growth rate of 1.5%, while outstanding credit granted by commercial banks to the non-financial private sector (NFPS) grew 0.9% in real terms, the first real growth rate recorded since July 2020.