Mexico | The vicissitudes of inflation and the effects on households

Summary

A monetary policy that carries the reference interest rate to an excessively restrictive terrain in a context where long-term inflation expectations remain well anchored can have counterproductive effects.

Key points

• Key points:
• Although inflation has been a generalized phenomenon, the factors that explain it are not homogeneous, not only because inflation is measured and integrated differently according to each country but also because the performance of specific components can affect it differently.
• Due to high inflation, 8 out of 10 households have suffered an increase in the price of their consumption basket of up to 17%, where the 20% of households with the lowest incomes have been the most affected with greater growth of 1 .7 pp compared to the last quintile.
• Despite the uncertainty and the effects left by the health crisis, Mexico has opportunities. We must work to configure a sustainable economy that allows, through this change, to raise the income of Mexican households sustainably.

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