Gasoline prices have risen more than when the liberalization process began in January 2017, reported the Bank of Mexico (Banxico).
“The bad news here is that for June, July and so far in August, the growth of energy prices has actually been even in the margin, greater than the increase they had in January 2017,” said General Director of Economic Research, Daniel Chiquiar.
Participating in a financial conference in Monterrey, he pointed out that currently almost two points of inflation are explained by the increase in energy prices, basically due to gasoline and LP gas.
He said that in January 2017, there was a “very important jump” associated with the increase in the prices of gasoline and other energy, derived from its liberalization process.
“That is to say, if in January 2017 we had a temporary but important problem, of a significant magnitude in inflation due to the increase in the prices of gasoline, that which had already been mitigated at the beginning of the year, we are once again facing the same problem,” he warned.
During the past year, the central bank acted to prevent that type of price shock, leading to a dislocation of inflation expectations and hindering the convergence towards the goal of 3%, he said.
Then, he recalled that at the beginning of 2018, the arithmetical effect of the increase in energy prices was undone, although non-core inflation remained at very high levels, between 7% and 8%, well above the target.
In spite of this, core inflation had been falling and with this, general inflation had been converging, he said.
He said that at the beginning of the year, Banxico published a forecast for inflation that was being met during the first five months of the year, although non-core inflation was relatively high.
However, he said that as from June, non-core inflation started to increase again and this mainly reflected the increase in energy prices, particularly gasoline and LP gas.
He argued that this is the reason for the restrictive monetary stance adopted by the central bank, since this is preventing a “disengagement” in inflation expectations.
That is, they have prevented prices from starting to overflow or to rise indiscriminately, he explained.
The reference rate went from minimum levels of 3% in most of 2015, to 7.75% given the behavior of inflation, and that has implied a certain tightening of the conditions of the economy, he said.
“Thanks to the monetary stance we have taken, we have avoided the unbalance in inflation expectations, we have prevented economic agents from beginning to think that inflation is going to overflow and then begin to raise prices indiscriminately,” he said.
Source: El Universal
