Central Banks latest publications
In March, the Consumer Price Index increased by 0,84%. With this outcome, inflation increased from 2,4% in February to 2,6% in year-on-year terms, mainly explained by supply factors.
Banxico’s Board kept its policy rate unchanged at 4.0%; the wording signals a shift from a dovish to a cautious tone. All five Board members voted to keep the policy rate on hold.
We are changing our call for tomorrow’s MPC decision to pause following today’s unexpected strong core inflation print. Core inflation rose strongly, to 4.1%, in the first half of March.
March 23, 2021
Should Banxico hold the policy rate steady, reacting to a temporary rise in inflation?
We stick with our call of a 25bp rate cut to 3.75%, but the odds became closer, 60-40 leaning to a cut in our view. The MPC should not react to temporary increases of inflation, already acknowledged in its communication and expected by everyone (ie, markets and analysts).
The FOMC made upward revisions to their GDP and inflation outlook and lowered its estimates of the unemployment rate, but kept its projections of the policy rate at the zero lower bound at least until 2023.
The Board of the Central Bank decided to maintain the monetary policy rate at 0,25% in March. The Bank renewed its commitment to maintain a strongly expansive stance for a prolonged period in spite of a faster recovery of global economic activity.
Six months after the return to the use of the interest rate as a monetary policy instrument of the Central Bank, we report first results.
The ECB, as expected, left its benchmark interest rates and broader policy guidance unchanged, but surprised boldly by announcing a significant step up of asset purchases under the PEPP next quarter. The decision was a clear response to the recent increase in bond yields.