Thursday, March 30, 2023

bitter medicine

Today, there is general consensus that the Board of Governors of the Banco de Mexico would agree. an increase of 0.75 percentage points at your reference rate.

Fortnightly CityBenemax Survey Indicates 33 out of 34 Economists And the institutions that were questioned believe that our central bank is going to align itself with the decision taken by the Federal Reserve on June 15.

In addition, Banxico’s target rate 7.75 percent. will be located on And this will be the highest after November 2019.

Previously, we had an upward cycle that took the reference rates to 8.25 per cent in December 2018, the highest level ever since Banxico established the target rates policy.

If the experts’ consensus forecasts are correct, then this level is going to be broken in the coming months, because The rate is estimated to reach 9.50 percent at the end of 2022.

This will affect the cost of credit.

yes, TIIE in 28 daysThe rate, often used as a reference for various credits, is located at 7.37 percent. If there was an increase of 2.25 percentage points in this rate hike cycle, maybe it will reach about 10 percent At the end of this year.

The last time TIIE reached that level was more than 20 years ago in July 2001.

This means that most of the rates charged from companies or individuals will be higher and higher in the coming months.

For example, at present the rate in a typical loan to an SME is TIIE plus 7 points, more or less.

If the reference rate reaches 10 percent, We’ll be talking about levels of the order of 17 percentLater this year or next year, the most expensive we’ve seen in a long time.

In the case of Credit Card, the rates are much higher than before. The CAT (Total Annual Cost) of many cards with credit limit below 50 thousand pesos are between 50 and 100 percent,

The inevitable effect of a restrictive monetary policy, such as that being implemented almost all over the world, is an increase in the cost of money.

And, in that context, it is likely that Bank credit usage is reduced Simply because it is more expensive than before.

By the same token, it is also likely that there decline in global demand of the economy, which is what central banks want, as this will limit or reduce pressure on prices.

In a country like Mexico, which has poor bankerization of the economy and limited access to bank credit, These measures have little effect compared to other countries.

The quarterly survey conducted by Banxico shows that the sources of funding most commonly used by companies are those of their suppliers, while individuals continue to largely use cash and in many cases informal financing channels. resort to.

Eventually, the increase in cost of money will spread to other circuits as well, but it will do so with a certain delay and with less force, so it is likely that The use of the “medicine” must be prolongedIn fact it already is, because that was before the rise began in the United States.

INEGI released inflation for the first half of June this morning and the forecast for the future is not good, so we will probably continue for a long time with this bitter medicine that the central banks are telling us and that may give many people a new An economic slowdown is expected during the next year.

Nation World News Desk
Nation World News Desk
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