Rate increase in Banxico would affect credits: experts – El Financiero

The Bank of Mexico (Banxico) has raised the reference interest rate in the last seven monetary policy decisions, and of which the last three were 50 points, so analysts believe that the authority will continue with the restrictive cycle what remains of the year.

Currently, the benchmark stands at 6.5 percent, however, the consensus of analysts is already discounting a new rise of 50 basis points at the meeting that Banxico’s Governing Board will hold on May 12, and they expect the rate to close this 2022 by 8.5 percent, so these increases could directly impact the loans of financial institutions.

In the last minute of monetary policy corresponding to the decision of March 24, a member of Banxico’s Governing Board warned that continuing to increase the interest rate at an excessively high rate could affect the country’s growth.

He added that the deterioration in the credits diminishes the perspectives.

“(One member) warned that the Mexican economy shows weakness precisely where monetary policy has a direct impact, such as the deterioration of credit for productive purposes, the stagnation of investment, the lack of dynamism in construction, the fall in the consumer credit and the reduction in domestic sales of new cars,” the document reads.

Amín Vera, director of economic analysis at BW Capital, highlighted that, in general, economic agents correctly anticipate the start of slowdowns and even recessions; so they try to offset its effects by reducing spending, and consequently their demand for credit, as much as possible.

“In the case of Mexico, this forecast is further reinforced by the high level of informality and the low penetration of financial services, to the extent that a good part of the banked population is relatively reluctant to make long-term commitments; therefore, we would expect an annualized contraction with respect to certain types of loans in which a significant proportion of income is committed, such as mortgages and automobiles”, he added.


Ernesto O’Farrill, president of the Bursametric Group, He agreed that the fact that Banxico raises the rate will have an impact on credits, since it indicated that “the cost of money becomes more expensive,” he said.

will continue to climb

The expert explained that Banxico is likely to continue raising rates in the face of higher projections of increases in the US by the Federal Reserve (Fed). “Banxico should do the same and follow the Fed in raising rates,” and pointed out that consumer loans for durable goods could be among the most affected by this forecast, added to a context of high inflation.

According to Banxico data, consumer loans were the most affected during the health crisis, linking 21 months of contractions to December 2021.

However, since January 2022, loans in this segment have recovered dynamism, exceeding one trillion pesos and growing at an average of 1.9 percent in real terms in the last three months.

“It causes credit costs to tend to rise and with this it is more complicated for companies and people to apply for a loan or even face difficulties in paying off debts they contracted in the past,” said Héctor Magaña, professor at the Tec from Monterrey.

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