Friday, June 2, 2023

Fitch says that Mexico will not be able to distance its monetary policy from the US.

The Mexican economy will have more resilience in the face of the expected recession in the United States, although it will not be able to distance its monetary policy from the Federal Reserve (Fed, in English), said Shelly Shetty, general director of sovereign debt at Fitch, from Fitch Ratings.

The board of directors of the team that evaluates national credit profiles around the world pointed out that the Mexico-United States relationship has many commercial ties that keep them very integrated.

“The commercial links, the remittance links, the tourist links are very evident,” he commented.

However, the specialist said that given the imminent recession of the US economy, Fitch expects “a little more economic resilience in Mexico this time”, compared to recent history with the United States.

In this sense, Shetty recalled that in the past, when the US economy entered a recession, “Mexico also had a severe fever.”

The Fitch analyst said that a key factor is that the economies of both countries are in a “somewhat different economic cycle”, since Mexico still has lagging economic sectors.

“(Mexico’s) recovery from the pandemic has not been fast and furious. In fact, you have seen the United States recover quite substantially,” he said.

In fact, he pointed out that the Mexican economy is one of the “furthest behind” even in Latin America, which has also affected the recovery of the region.

For this reason, he mentioned that while an increase of 0.2% of the US gross domestic product (GDP) is expected for 2023, growth of up to 1.5% is expected for Mexico.

In turn, Shetty maintained that high inflation in North America will prevail in 2023, which would maintain restrictive monetary policies in both the United States and Mexico.

Fitch’s specialist in sovereigns projected that by the end of the current year the interest rate dictated by the Bank of Mexico would end at 11% and 5% in the United States.

Meanwhile, he noted: “We don’t expect Mexico to deliver quick interest rate cuts or anything like that in 2023.”

Shetty added that by the end of 2024 interest rates in Mexico could be reduced to as much as 9.5%, so it “has a very limited space to disassociate itself from the Federal Reserve” in the US.


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