{5283644e-df9c-8bf5-de38-7f95bfc9d606}.pdf
TRANSCRIPT
Quarterly Report
August 12, 2015
April – June 2015
11
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
22Quarterly Report April-June 2015
3
Moreover, during 2Q 2015, it even reached its historic minimum levels and hasrecently remained below the target.
Monetary Policy Conduction in Mexico
3
As a result of Banco de Mexico’s effort to curb inflation, during 2015convergence of inflation to its permanent 3 percent target has beenachieved.
The conduction of the monetary policy seeks to ensure the stability ofthe national currency’s purchasing power.
This, ensuring that it is achieved at the lowest cost to society in terms of economicactivity, at all times.
The above took place in a context in which the pass-through of the exchange ratedepreciation onto prices has been limited, mainly reflected in the prices of durablegoods, and without contaminating prices of non-tradable goods and services.
Quarterly Report April-June 2015
4
Favorable inflation evolution.
Low growth rate of economic activity.
Domestic Environment: International Environment:
The convergence of inflation to its target has been achieved in a particularlycomplex environment, given the circumstances faced by the monetarypolicy.
Well-anchored long-term inflationexpectations and reductions in theshort-term ones.
High volatility in international financialmarkets.
• The imminent beginning of thenormalization of the U.S. monetary policy.
• Lower commodity prices, in particularcrude oil prices.
→ A considerable depreciation of theMexican peso against the U.S. dollar.
Quarterly Report April-June 2015
5
During the period covered by this Report, the Board of Governors maintainedthe target for the Overnight Interbank Interest rate unchanged at 3 percent,by virtue of the fact that it estimated the current monetary stance to beconducive to ensure the convergence of inflation to its 3 percent target.
2
3
4
5
6
7
8
9
10
20
03
20
04
20
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20
07
20
08
20
09
20
10
20
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20
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13
20
14
20
15
Target for the Overnight Interbank Interest Rate1/
%
1/ The Overnight Interbank Interest Rate is shown until January 20, 2008.Source: Banco de México.
5
August
Quarterly Report April-June 2015
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
66Quarterly Report April-June 2015
7
Industrial ProductionQuarterly change of 3-month moving
average in percent, s. a.
Trade VolumeQuarterly change of 3-month moving
average in percent, s. a.
Although the world economic activity recovered moderately in 2Q 2015,global industrial production and the volume of international tradedecreased.
s. a./ Seasonally adjusted data.Source: Haver Analytics.
s. a./ Seasonally adjusted data.Source: Haver Analytics.
-15
-10
-5
0
5
10
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
May-10
-8
-6
-4
-2
0
2
4
6
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
May
Quarterly Report April-June 2015
AdvancedWorld
Emerging
WorldAdvanced
Emerging
8
25
40
55
70
85
100
115
130
145
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
WTI
Futures1/
Crude Oil PricesUSD per barrel
Commodities PricesIndex 2005=100
1/ Data up to August 11, 2015.Source: Bloomberg.
Source: International Monetary Fund.
Commodities prices exhibited high volatility in 2Q 2015, and by the end ofthe referred quarter they decreased again.
0
50
100
150
200
250
300
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Quarterly Report April-June 2015
Mexican Oil Mix
July
Total
Energy
Industrial Metals
Food
99
2
3
4
5
6
7
8
9
10
11
-800
-600
-400
-200
0
200
400
600
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Change in Non-farm Payrolls and Unemployment Rate
Thousands of jobs and % of EAP, s. a.
-30
-25
-20
-15
-10
-5
0
5
10
15
20
05
20
07
20
09
20
11
20
13
20
15
Industrial ProductionPercent change, s. a.
EAP/ Economically Active Population.s. a. / Seasonally adjusted data.Source: Bureau of Labor Statistics (BLS).
s. a. / Seasonally adjusted data.Source: Haver Analytics.
U.S. economic activity maintained a moderate growth rate. Nevertheless, theindustrial sector registered weakness.
June
Quarterly Report April-June 2015
July
Change in non-farm payrolls
Unemployment rateAnnual Change
of 3-month
Annual change
10
Unemployment RatePercentage of EAP, s. a.
Retail Sales1/
Index December 2007=100, s. a.
s. a. / Seasonally adjusted figures.EAP/ Economically Active Population.Source: Eurostat.
s. a. / Seasonally adjusted figures.1/ Car sales excluded.Source: Eurostat.
In 2Q 2015, economic activity in the Euro zone kept recovering at a moderatepace, particularly as a reflection of an extremely loose monetary policy.
0
5
10
15
20
25
30
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Euro Zone
Germany
Spain
Ireland
Italy
Portugal
France
70
75
80
85
90
95
100
105
110
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Euro Zone
Ireland
Spain
France
Italy
Portugal
Quarterly Report April-June 2015
Germany
June June
11
ExportsAnnual change of 3-month moving
average in percent
Source: Haver Analytics. Source: Bloomberg and INEGI.
Industrial ProductionAnnual change of 3-month moving
average in percent
-10
-5
0
5
10
15
20
25
30
35
20
10
20
11
20
12
20
13
20
14
20
15
Mexico
South Africa
Korea
IndiaChina
Brazil
Russia
-40
-20
0
20
40
60
80
20
10
20
11
20
12
20
13
20
14
20
15
ChinaSouth Africa
Russia
India
Brazil
Mexico
Korea
Given lower commodities prices, the activity in emerging economiescontinued weakening in 2Q 2015.
Quarterly Report April-June 2015
JuneMayMay
JuneJulyJuly
1212
Advanced Economies: Expected Monetary Policy Rates 1/
%
1/ The expected rates are the trajectories implicit in OIS Curves (Overnight IndexSwap). Source: Bloomberg with estimates from Banco de México.
The Federal Reserve is expected to start the normalization process of itsmonetary policy before the year ends. In light of this, the U.S. dollarappreciated against practically all currencies.
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Jun
-12
Sep
-12
Dec
-12
Mar
-13
Jun
-13
Sep
-13
Dec
-13
Mar
-14
Jun
-14
Sep
-14
Dec
-14
Mar
-15
Jun
-15
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
U.S. Dollar Index (DXY) 2/
Index 1-Jan-2013=100
2/ DXY index is estimated by the Intercontinental Exchange (ICE) based on theweighted geometric mean of the dollar's value compared with a basket of 6 othermajor currencies which are: EUR: 57.6%, JPY: 13.6%, GBP: 11.9%, CAD: 9.1%, SEK:4.2%, and CHF: 3.6%. Source: Bloomberg.
78
81
84
87
90
93
96
99
102
Feb
-13
Ap
r-1
3
Jun
-13
Au
g-1
3
Oct
-13
Dec
-13
Feb
-14
Ap
r-1
4
Jun
-14
Au
g-1
4
Oct
-14
Dec
-14
Feb
-15
Ap
r-1
5
Jun
-15
Au
g-1
5
Quarterly Report April-June 2015
European Central Bank
Bank of England
Federal Reserve
Bank of Japan
End of 2015 End of 2016Implied target rate in OIS Curve
Depreciation
August
In this setting, emerging economies registered lower capital inflows.
Quarterly Report April-June 2015
13
-80
-60
-40
-20
0
20
40
60
80
100
120
140
1 4 7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
Weeks
2008
2009
2010
2012
2013
2014
2015
2011
Accumulated Capital Flows to Emerging Economies(Debt and Equity) 1/
Billions of dollars
1/ The sample covers funds used for the buying-selling of stocks and bonds from emerging countries, recorded in advanced countries. Flows excludeportfolio performance and changes in the exchange rate.Source: Emerging Portfolio Fund Research.
13
Aug-05
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
175
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
China: Exchange RateYuan per USD
1414
Source: Bloomberg.
Informe Trimestral Abril – Junio 2015
Emerging economies’ currencies depreciated significantly.
Source: Bloomberg.
Emerging Economies: Nominal Exchange Rate against USD
Index 01-Jan-2013 = 100
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
5.90
6.00
6.10
6.20
6.30
6.40
6.502014
Korea
Chile
Colombia
South Africa
Depreciation
Brazil
Mexico
August
Depreciation
August
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
1515Quarterly Report April-June 2015
80
90
100
110
120
130
140
150
160
90
94
98
102
106
110
114
118
122
80
90
100
110
120
130
140
150
160
90
94
98
102
106
110
114
118
122
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
16
In 2Q 2015, economic activity in Mexico continued exhibiting a low growthrate.
85
90
95
100
105
110
115
120
125
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Economic Activity Indicators Index 2008 = 100, s. a.
Industrial ActivityIndex 2008 = 100, s. a.
Mining SectorIndex 2008=100, s. a.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: Monthly Indicator of Industrial Activity,Mexico’s System of National Accounts, INEGI.
16
JuneMay80
85
90
95
100
105
110
40
60
80
100
120
140
160
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
June
Quarterly Report April-June 2015
Total IGAE
Industrial production
Services IGAE
Agricultural IGAE
Mining
Manufactures
Construction
Electricity
Crude oil mining
Mining of metal and non-metal
minerals
Services related to mining
June
40
60
80
100
120
140
160
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
June
17
Oil and Non-Oil ExportsIndex 2008=100, s. a.
Manufacturing ExportsIndex 2008=100, s. a.
s. a. / Seasonally adjusted data.Source: Banco de México.
s. a./Seasonally adjusted data.Source: Banco de México.
Exports registered a weak performance.
50
70
90
110
130
150
170
190
210
230
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Total
Automobile
Non-Automobile
June
Quarterly Report April-June 2015
Non-oil exports
Oil exports
80
85
90
95
100
105
110
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
Non-residential
Residential
18
Investment presented a lower dynamism, as compared to that observed inprevious quarters.
Investment and its ComponentsIndex 2008=100, s. a.
Residential and Non-Residential Construction Investment
Index 2008=100, s. a.
Business Confidence IndexIndex with respect to 50 points, s. a.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts,INEGI.
s. a. / Seasonally adjusted data.Source: INEGI.
May0
10
20
30
40
50
60
70
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
60
70
80
90
100
110
120
130
140
150
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
May July
Quarterly Report April-June 2015
National machinery and
equipment
Total
Construction
Imported machinery and
equipment
Business confidence index
Right moment to invest component
70
75
80
85
90
95
100
105
110
115
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
-30
-20
-10
0
10
20
30
40
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Monthly Indicator of Private Consumption in the Domestic Market and ANTAD Total Sales
Index 2008=100, s. a.
Commercial Bank Performing Credit to Consumption 1/
Real annual % change
Consumer Confidence Index Jan-2003=100, s. a.
s. a. / Seasonally adjusted data.Source: INEGI and prepared by Banco de Méxicowith ANTAD data.
1/ It includes loans by credit card-regulated sofomes.Source: Banco de México.
s. a. / Seasonally adjusted data.Source: INEGI and Banco de México.
1919
July June
In turn, private consumption kept recovering at a moderate pace.
85
90
95
100
105
110
115
120
125
130
135
140
85
90
95
100
105
110
115
120
125
130
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
May
ANTAD
July
Quarterly Report April-June 2015
Private consumption
20
In 2Q 2015, slack conditions persisted in the labor market, in a context inwhich some indicators no longer showed the improvement they had beenexhibiting since 2014.IMSS-Affiliated Jobs, Employed
Population and Total IGAE Index 2012=100, s. a.
National Unemployment Rate % of EAP, s. a.
IMSS Reference Wage 1/
Annual % change
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
June85
88
91
94
97
100
103
106
109
112
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
JulyMay
s. a. / Seasonally adjusted data.1/ Permanent and temporary workers in urban areas.Seasonally adjusted by Banco de México.Source: Calculated by Banco de México with data fromIMSS and INEGI (SCNM and ENOE).
EAP/ Economically active population.s. a. / Seasonally adjusted data.Source: National Employment Survey (EncuestaNacional de Ocupación y Empleo), INEGI.
EmployedPopulation
1Q 2015
1/ During the second quarter of 2015, on average 17.7million of contributors were registered to IMSS.Source: Calculated by Banco de México with data fromIMSS.
2
3
4
5
6
7
8
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
2Q 2015
Quarterly Report April-June 2015
IMSS-affiliated Jobs1/
Total IGAE
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
2121Quarterly Report April-June 2015
Consumer Price IndexAnnual % change
Source: Banco de México and INEGI.
2222
1
2
3
4
5
6
7
8
9
10
11
12
13
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
July
In 2015, headline inflation converged to the permanent 3 percent target.Moreover, since May 2015 it has even lied below the target, reachingminimum historic levels.
Quarterly Report April-June 2015
Headline
Non-core
CoreVariability interval
23
Merchandise
-2
-1
0
1
2
3
4
5
6
7
8
9
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Services
Source: Banco de México and INEGI. Source: Banco de México and INEGI.
Core Price IndexAnnual % change
23
The pass-through of the exchange rate depreciation onto prices has beenlimited, mainly reflecting in the prices of durable goods and withoutgenerating second round effects.
July
0
1
2
3
4
5
6
7
8
9
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
July
Merchandise
Non-durables
Durables
Quarterly Report April-June 2015
Services
Education (tuition)
HousingOther services
-3
0
3
6
9
12
15
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
-15
-12
-9
-6
-3
0
3
6
9
12
15
18
21
24
27
30
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Agricultural Energy and Government Approved Fares
Source: Banco de México and INEGI. Source: Banco de México and INEGI.
Non-Core indexAnnual % change
24
July July
24
The non-core price index reduced its average annual growth rate between1Q and 2Q 2015.
Quarterly Report April-June 2015
Agricultural
Livestock
Fruits and vegetables
Energy and government approved fares
Energy
Government approved fares
-10
-8
-6
-4
-2
0
2
4
6
82
00
6
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
1Q 2015
Output Gap 1/
% of potential output, s. a.
s. a. / Calculated with seasonally adjusted data.1/ Estimated using the Hodrick-Prescott (HP) filter with tail correction method; see Banco de México (2009), “Inflation Report April–June 2009”, p.69.The shaded area is the 95% confidence interval of the output gap, calculated with an unobserved components method.Source: Calculated by Banco de México with data from INEGI.
25
GDP
IGAE
25
In the described environment, the output gap is still at negative levels.However, if the economic activity registers greater dynamism, it will begradually closing.
May
Quarterly Report April-June 2015
Break-even Inflation Decomposition 1/
%
Annual Headline Inflation ExpectationsMedian, %
1/ The inflation risk premium is calculated with data from Valmer and Bloomberg,based on the methodology described in Box 1 “Decomposition of the Break-evenInflation” of the Quarterly Report October-December 2013.
Source: Survey of private sector economic analysts’ expectations, Banco deMéxico..
26
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
26
Next 4 years
Next 5-8 years
Variability Interval
End of 2016
End of 2015
July
Long-term inflation expectations implicit in market instruments remainedstable, while the survey-derived ones decreased for shorter terms.
Quarterly Report April-June 2015
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Inflationary risk premium
Long-term inflation expectation
Break-even inflation implicit in 10-year bonds
3.08
-0.14
3.22
July
27
→ The nominal exchange rate depreciation contributes to a more efficientreal exchange depreciation.
27
In a context of:
Well-anchored inflation expectations.
A low pass-through of exchange rate adjustments onto prices.
Efforts to ensure the fiscal consolidation.
Informe Trimestral Abril – Junio 2015
The adjustment in real terms of the national currency’s exchange ratefacilitates the economy’s adjustment to the new international environment.
28
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Exchange Rate and its Expectations for the End of 2015 and 2016 1/
Pesos per USD
4
6
8
10
12
14
16
18
20
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Implied Volatility in ForeignExchange Rate Options 2/
%
1/ The observed exchange rate is the daily FIX exchange rate. The latest data forthe observed exchange rate is August 11, 2015, and the foreign exchange rateforecasts is August 05, 2015.Source: Banco de México and Banamex survey.
2/ It refers to implied volatility in one-month options.Source: Bloomberg.
End of 2016
End of 2015
Observed
15.65
15.30
16.32
The nominal exchange rate adjustment of the Mexican peso against theU.S. dollar has been significant, although it occurred under orderlyconditions in the FX market.
August August
Quarterly Report April-June 2015
29
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
International ReservesUSD billion
Foreign Exchange Commission Preemptive Steps to Provide Liquidity
to the FX Market:
Source: Banco de México and International Monetary Fund.
31-July
International Reserves
IMF´s Flexible Credit Line
To reduce the probability that potential pressures on the exchange rate coulddisrupt the proper functioning of this market in Mexico, the Foreign ExchangeCommission took various measures during the reference period.
December 2014: Auctions of dollars of up
to USD 200 million at a minimum price.
March 2015: Daily auctions of USD 52
million without a minimum price.
May 2015: The extension until September
29, 2015 of the auction period of USD 52
million without a minimum price.
July 2015: The increment in the amount
of auctions without a minimum price from
USD 52 to 200 million, and the decrease
of the threshold from 1.5% to 1.0%, to
activate the auctions with a minimum
price. Both mechanisms are in force until
September 30, 2015.
Quarterly Report April-June 2015
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1 1 3 6 1 2 3 5 10 20 30
Source: Banco de México and Proveedor Integral de Precios (PiP).
3030
Government Bond Yield Curve%
Government Securities’ Holdings by Foreign Investors
MXN billion
1/Includes: Bondes, Bondes D, Bonos, Cetes and Udibonos.Source: Banco de México.
Interest rates increased for medium and long terms. However, governmentsecurities’ holdings by foreign residents remained stable.
0
400
800
1,200
1,600
2,000
2,400
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Bonds
CETES
July
Total 1/
Quarterly Report April-June 2015
11-aug-15
months yearsdays
2Q-2015 Average1Q-2015 Average
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
3131Quarterly Report April-June 2015
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
s. a. / Seasonally adjusted data. Source: Banco de México.
Fan Charts
GDP Growth
2015 Between 1.7 and 2.5
2016 Between 2.5 and 3.5
32
2008 2010 2012 2014 2015 2016
2014Q4
2015Q4
2016 Q4
32
Increase in the Number of IMSS-affiliated Jobs
2015 Between 560 and 660 thousand
2016 Between 600 and 700 thousand
Output Gap% of potential output, s. a.
Economic Activity Outlook
GDP GrowthAnnual %, s. a.
s. a. / Seasonally adjusted data. Source: INEGI and Banco de México.
2008 2010 2012 2014 2015 2016
Quarterly Report April-June 2015
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2015T4
2016T4
2014T4
A deterioration in investors’ outlook.
That manufacturing exports will keep registering a low dynamism, if theU.S. industrial sector maintains a weak performance.
A greater dynamism of the exports’ sector, given a greater than expectedrecovery of external demand and a real exchange rate depreciation.
Risks to the Growth Outlook:
.
Downward:
Upward:
33
That the recovery of the national oil production in Mexico will be delayed.
A further increase in international financial markets volatility.
33
Rapid progress in the implementation of structural reforms and in thestrengthening of the rule of law.
Quarterly Report April-June 2015
Inflation Outlook
Headline Inflation
20
15
20
16
34
At levels close to 3 percent.
34
Below 3 percent for the rest of the year.
Quarterly Report April-June 2015
Core Inflation
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Headline inflation target
Variability interval
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Headline inflation target
Variability interval
Annual Headline Inflation 1/
%Annual Core Inflation 2/
%
1/ Quarterly average of annual headline inflation.Source: INEGI and Banco de México.
2/ Quarterly average of annual core inflation.Source: INEGI and Banco de México.
Fan Charts
Inflation is estimated to continue with a favorable evolution for the rest ofthe year and during 2016.
35
2015 Q4
2014 Q4
2016 Q4
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
2015 Q4
2014 Q4
2016 Q4
35Quarterly Report April-June 2015
Downward Upward
Risks to Inflation Forecast :
That the depreciation of theMexican peso increases and affectsnon-tradable goods prices, whichcould contaminate inflationexpectations.
36
36
A still lower than expecteddynamism of economic activity.
Further reductions in energy pricesand/or in telecommunicationservices prices.
Quarterly Report April-June 2015
37
Monetary Policy Stance
Hence, Banco de México’s Board of Governors will monitor theperformance of all inflation determinants and its expectations in themedium and long term, in particular:
The performance of the exchange rate.
The monetary policy stance of Mexico relative to the U.S.
The evolution of the degree of slack in the economy.
All of the above, in order to be able to take the necessary measures, flexibly andwhen needed, to consolidate the convergence of inflation to the 3 percent target.
Domestic conditions
The cyclical conditions of the economycontinue to show weakness, inflation hasremained below 3 percent and inflationexpectations are well-anchored.
External conditions
Federal Reserve possible monetary policyactions could have further repercussions onthe exchange rate, inflation expectations,and, therefore, on the price dynamics inMexico.
Quarterly Report April-June 2015
Challenges to Strengthen Confidence in the Mexican Economy
38
❶ In light of a complex international environment and the expectation that itwill persist in the future, it is of key to preserve a solid macroeconomicframework.
The structural strengthening of public finances is required, which becomes morerelevant given a significant decrease in crude oil prices and production. Inparticular, it is necessary that the public debt to GDP ratio stabilizes at sustainablelevels in the medium and long term.
❷ Higher and sustainable growth rates. In order to achieve this it is necessaryto increase the productivity, which, in turn, requires clear progress in theimplementation of structural reforms.
❸ The strength of institutions is crucial to back a good functioning of theeconomy. For this reason Mexico should make an additional effort tostrengthen the institutions and the rule of law.
38Quarterly Report April-June 2015
