Don't lose sight of inflation issues

It is part of the populist narrative to argue that thanks to the so-called Package Against Inflation and High Costs (PACIC), the lowest inflation rate of the year was achieved.

It serves, of course, to cheer on one's predecessor, but it also has a real utility in generating expectations of lower inflation, leading to a moderation in price formation.

However, the triumphant tone used by the ruling party and its unofficial cheerleading, of an apparent victory over inflation, should be ignored by the members of the Bank of Mexico's Board of Governors.

It would seem obvious to think that monetary policy experts don't see the data recently released by INEGI in the same way, in which the National Consumer Price Index (INPC) closed last month at an annual rate of 3.51 percent.

However, some central bankers have indicated their propensity to align themselves with these desires, implementing a de facto dual mandate and seeking a boost to economic performance through monetary policy relaxation at the cost of losing some of their decisiveness in combating inflation.

Yesterday, in addition to learning the inflation figures, we also learned that with Deputy Governor Jonathan Heath's dissenting vote, the remaining members of the Governing Board decided to lower the benchmark interest rate, not by half a percentage point, but by a quarter of a percentage point, to 7.75 percent.

There is a promise to be consistent in future decisions with the bank's own inflation target, but the most recent headline inflation data may encourage them to continue on the path that the Treasury Department would like to see.

Beyond the headlines of falling inflation and official propaganda, we must pay attention to the fact that core inflation, which eliminates the volatile prices that helped the CPI last month, remains at 4.23%, which does not imply an improvement compared to the previous month.

The services price subindex showed an annual increase of 4.44%, and merchandise prices have been on an upward trend all year.

So, good for chicken, whose price fell by 3.61% last month, and sad for eggs, which rose by 5.91%. But price behavior goes far beyond a situation that is well measured by the non-core inflation index.

So, in this case, promoting lower inflation helps some economic sectors buy into the narrative that it's time to moderate prices, which is very good.

But from the monetary side, they must see that a victory over inflationary pressures is still far off and that their message must be uncompromising regarding high inflation.

Economic agents who miss the morning press conference but do follow the monetary policy decisions of the Bank of Mexico's Board of Governors want to be certain that the decision-makers are firm and aren't so easily bought into the resounding success of the Pacic.