The President of Mexico, Andrés Manuel López Obrador, questioned this Thursday that central banks raise interest rates to face inflation hours before the new monetary decision of the Bank of Mexico (Banxico) was revealed.
“All over the world, they raise rates to slow down economic growth, to stop the economy, but that is not enough nor is it the best, that is the formula that they always apply, in an orthodox way“He said in his morning press conference.
His remarks come before the Mexican central bank announces the new interest rate, which is now at an all-time high of 8.5% after 10 consecutive increases in the target.
Banxico, which has an annual inflation target of 3%, has responded in this way to the rise in prices in Mexico, where the general inflation rate rose to 8.76% in the first half of September, its maximum in 22 years.
But López Obrador criticized that, to deal with inflation, “the technicians are applying the usual formula, which means increasing interest rates.”
“It’s like when a car (car) heats up, that’s the inflation, and then, so that it doesn’t heat up, it turns off. Well, yes, there’s no more inflation, the car doesn’t heat up anymore, but it doesn’t run, it doesn’t work anymore. there is growth,” he said ironically.
The Mexican president defended the “heterodox” policies of his administration, in particular the fiscal subsidy for gasoline, which has cost 293 billion pesos, according to data he offered on September 1.
“We are not relying on what the central banks are doing, in applying this formula to stop inflation, we are taking heterodox measures, such as subsidizing gasoline, diesel, that is not in the formulas of the policy neoliberal, because the subsidy is demonized,” he said.
The Mexican ruler lamented the loss of purchasing power, despite the fact that in his government the minimum wage has increased by 65% in real termssince he took office in December 2018.
He recalled that next Monday he will present an anti-inflationary plan in which companies responsible for the basic basket agreed to stabilize product prices.
“We do not want this to continue happening (inflation), I have special attention, I am giving special follow-up to this matter. If you ask me what worries you these days, your main concern, the number one in economics: inflation, and that is why they are acting,” he remarked.
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