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Mexico central bank says Ukraine crisis could spur new inflation -Breaking

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© Reuters. A facade of an office block in Mexico City shows the Bank of Mexico logo, Tuesday, February 9, 2022. REUTERS/Edgard Garrido

By Adriana Barrera

MEXICO CITY (Reuters – Mexico’s Central Bank said on Wednesday that inflation pandemics were more intense and prolonged than they expected. It also couldn’t rule out the possibility of new price pressures due to Russia’s invasion.

According to Banxico (Bank of Mexico), the Russia-Ukraine Crisis could result in higher commodity prices. This includes energy and agriculture products. It warned that disruptions in supply chains and increased wages could lead to inflationary pressures. However, the Bank of Mexico, also known as Banxico, stressed its focus on monetary policies that aim at maintaining price stability.

Victoria Rodriguez, Banxico Governor, cautioned that while it wasn’t possible to predict how Russia-Ukraine will affect inflation and prices in the near future but stated that the conflict would still be considered in the monetary policy decision making process.

“We will pay close attention to the evolution of this conflict. … Rodriguez stated that it will all depend on how long and broad the project is.” It could have an impact on the growth of energy prices and grain prices.

According to the central banks, it anticipates inflationary pressures decreasing throughout 2022. Annual headline inflation will average at 4% during the fourth quarter. It will then decline to close the bank’s 3% target in the second quarter 2023.

The forecast also predicted that the GDP will grow by between 1.6% to 3.2% in this year.

Rodriguez pointed out that U.S. Federal Reserve decision are one “relevant variable” Banxico uses in making its monetary policy decisions.

Fed Chair Jerome Powell, balancing high U.S. inflation against the complex new risks of a European land war, said earlier on Wednesday the central bank would begin “carefully” raising interest rates at its upcoming March meeting but would be ready to move more aggressively if inflation does not cool as quickly as expected.

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