Presentación de PowerPoint · February 4, 2016 February 17, 2016 Extraordinary session Rate unchanged at 3.25%. 50 bp increase to 3.75%. Quarterly Report January - March 2016 3 The

Quarterly Report

May 25, 2016

January - March 2016

Outline

2Quarterly Report January - March 2016

Monetary Policy1

Forecasts and Balance of Risks4

External Conditions2

Inflation and its Determinants3

February 4, 2016

February 17, 2016Extraordinary session

Rate unchanged at 3.25%.

50 bp increase to 3.75%.

Quarterly Report January - March 2016

3

The Board alerted about the risk to inflation and its expectations, derived fromthe possibility that the depreciation of the national currency may further persistor become more pronounced.

In response to a sudden surge in international financial market’s volatility, adeterioration of the external environment and strong exchange rate fluctuations,all of which could affect inflation and its expectations.

Banco de México carefully weighed the possible effects of both domestic and external factors on theevolution of inflation and its expectations, seeking to define the most appropriate monetary policystance at each point of time.

Inflation has registered a favorable performance, despite a challenging environment.


4

The decision of February 17, 2016 was part of a coordinated measure taken together with the Ministry ofFinance.

Banco de México

50 bp increment in the reference rate at an extraordinary session.

Ministry of Finance

Announced a preemptive adjustment to the expenditure of the Federal Public Administration,

concentrated in PEMEX.

Decided to suspend the daily dollar auctions mechanisms,

leaving open the possibility to discretionally intervene, in

exceptional cases.

Foreign Exchange Commission

The implemented measures produced the expected result:

Considerable appreciation of the national currency, a trend that persisted for several weeks.

Increments in short-term interest rates, while longer-term rates went down.

o Significant flattening of the yield curve, as it was intended.

→ The authorities stressed that the key to ensure the anchoring of the national currency would bepreserving sound macroeconomic fundamentals.


Subsequent decisions:

Central scenario for the future evolution of inflation congruent with the 3 percent target.

Neutral balance of risks to inflation.

March 18, 2016

May 5, 2016



Monetary Policy Rates%

1/ Before January 20, 2008 it refers to the observed Overnight Interbank Interest Rate.2/ The upper limit of the target range is showed.Source: Federal Reserve and Banco de México.

0

2

4

6

8

10

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

U.S.: Target Federal Funds Rate 2/

Mexico: Target for the Overnight Interbank Interest Rate 1/

May


Outline


Monetary Policy1




-40

-30

-20

-10

0

10

20

30

40

20

00

20

02

20

05

20

08

20

10

20

13

20

16

-1

0

1

2

3

4

5

6

20

00

20

03

20

06

20

09

20

12

20

15

20

18

20

21

Evolution of GDP Growth ForecastsAnnual % change

Trade of Goods 1/

Annual % change, s. a.

Soruce: IMF, WEO spring 2012-2016. 1/ Refers to the sum of imports and exports.s. a. / Seasonally adjusted data.Source: CPB Netherlands.

World Economy

2015

Observed

March


20132014

20122011

2016 Volume

Price

Value

The downward adjustment of the world economic growth expectations continued and worldtrade remained stagnated.

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20

10

20

11

20

12

20

13

20

14

20

15

20

16


9

Consumer Price Index and Personal Consumption Expenditures Deflator

Annual % change, s. a.

Real GDP and ComponentsQuarterly % change at annual rates, and contributions in percentage points, s. a.

Change in Non-farm Payrolls and Unemployment Rate

Thousands of jobs and % of EAP, s. a.

s. a. / Seasonally adjusted data.Source: U.S. Department of Commerce and Bureau of EconomicAnalysis (BEA).

s. a. / Seasonally adjusted data.Source: Bureau of Economic Analysis (BEA).

EAP/ Economically Active Population.s. a. / Seasonally adjusted data.Source: Bureau of Labor Statistics (BLS).

United States

2

3

4

5

6

7

8

9

10

11

-800

-600

-400

-200

0

200

400

600

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Change in non-farm payrolls

Unemployment rate

April-4

-2

0

2

4

6

8

20

10

20

11

20

12

20

13

20

14

20

15

20

16

GDP

Private Consumption

Fixed Investment

Inventories Net ExportsPublic Expenditure 1Q-2016

PCE: Headline

PCE: Core

March

CPI: Headline

April

In the U.S., inflation remained below its 2 percent target and GDP growth significantlydecelerated in 1Q 2016, while labor market conditions continued improving.

15

30

45

60

75

90

105

120

135

150

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

Mexican Oil Mix

WTI

Futures 1/

Crude Oil PricesUSD per barrel

Mexico: Terms of Trade3-month moving average

Index Oct-2014=100

1/ Data up to May 24, 2016.Source: Bloomberg.

Source: Calculated by Banco de México with data from SAT, Ministry of Economy, Bancode México, INEGI. México´s Goods Trade Balance. SNIEG. National Interest Information.


40

50

60

70

80

90

100

110

120

130

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Total

Oil

Non-oil

March

After the drop registered during the first weeks of 2016, commodity prices recovered slightly,although they still remain at low levels. Thus, the terms of trade deteriorated in Mexico.

11

-90

-70

-50

-30

-10

10

30

50

70

90

110

1 4 7

10

13

16

19

22

25

28

31

34

37

40

43

46

49

52

Weeks

2008

2009

2012

2013

2014

2015

20112016

Accumulated Capital Flows (Debt and Equity) 1/

Billions of dollars

90

100

110

120

130

140

150

160

170

180

190

200

210

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar

-16

May

-16

Nominal Exchange Rate against USDIndex 01-Jan-2013 = 100

1/ The sample covers funds used for the buying-selling of stocks and bonds from emerging countries,recorded in advanced countries. Flows exclude portfolio performance and changes in the exchangerate.Source: Emerging Portfolio Fund Research.

Source: Bloomberg.

Korea

Chile

Colombia

South Africa

Brazil

Mexico

May

May, 18

Emerging Markets


These factors have generated higher exchange rate volatility and lower capital flows toemerging economies.


Low world economic growth and stagnated global trade.

The Mexican economy is facing different challenges

Unstable international crude oil prices.

The normalization process of the U.S. monetary policy.

All of the above led to recurrent volatility episodes in international financialmarkets that passed through to Mexico’s local markets.

Outline


Monetary Policy1




1

2

3

4

5

6

7

8

9

10

11

12

13

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Consumer Price IndexAnnual % change

Source: Banco de México and INEGI.

Headline

CoreVariability Interval

Non-Core

14

1F-May


Inflation performance has been favorable:

12 consecutive months below the permanent target.

A low pass-through of exchange rate fluctuations onto prices.

-2

-1

0

1

2

3

4

5

6

7

8

9

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Merchandise Services

Source: Banco de México and INEGI. Source: Banco de México and INEGI.

Core Price IndexAnnual % change

Services

Education (tuition)

Housing

Other services

Enero

15

0

1

2

3

4

5

6

7

8

9

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Merchandise

Durables

Non-durables


1F-May1F-May

Core inflation showed a moderate upward trend derived from the relative price adjustmentsbetween merchandise and services.

-15

-12

-9

-6

-3

0

3

6

9

12

15

18

21

24

27

30

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Agricultural Energy and Government Approved Fares

Source: Banco de México and INEGI. Source: Banco de México and INEGI.

Non-Core IndexAnnual % change

Enero

16

-3

0

3

6

9

12

15

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Fruits and vegetables

Livestock

Agricultural Energy and governmentapproved fares

Energy

Government approved fares


1F-May 1F-May

A more favorable evolution of energy prices since 2015 continued decreasing the contributionof non-core inflation to headline inflation.

-20

0

20

40

60

80

100

120

140

160

180

19

69

19

71

19

73

19

75

19

78

19

80

19

82

19

84

19

87

19

89

19

91

19

93

19

96

19

98

20

00

20

02

20

05

20

07

20

09

20

11

20

141.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Headline Inflation Expectations Median, %

Annualized Monthly Rate of Inflation 2/

%, s. a.

1/ Based on the methodology described in Box 1 “Decomposition of the Break-even Inflation” of the QuarterlyReport October-December 2013. For this report, the estimate was updated to include data up to December2015.Source: Banco de México.

s. a. / Seasonally adjusted data.2/ Technical Chapter from the Inflation Report October - December 2010: Change in the Nominal System ofthe Mexican Economy in the early 2000’s. It is shown that from October 2001 inflation began a stationaryprocess [I(0)]. Source: Banco de México.

April


Next 4 years

Variability interval

End of 2016

End of 2017

Long-term (Market Instruments) 1/

April

Adoption of the Inflation Targeting

Regime

Inflation expectations implicit in long-term market instruments remain stable, while survey-basedexpectations kept decreasing, in a context in which the level, volatility and persistence of inflationhave diminished since various years ago.

4

6

8

10

12

14

16

18

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6


18

Exchange Rate 1/

Pesos per USDImplied Volatility in Exchange Rate Options 2/

%

1/ Refers to FIX exchange rate. Data up to May 24th. The vertical black line refers to January 1st,while the dashed line indicates the February 17th.Source: Banco de México.

2/ Refers to implied volatility in one-month options. The vertical black line refers to January 1st,while the dashed line indicates the February 17th.Source: Bloomberg.

18.47

May May

The foreign exchange market kept functioning as the main absorber of external shocks.


19

Government Securities’ Holdings by Foreign Investors 1/

MXN billionInternational Reserves

USD billion

1/ Total includes CETES, bonos, udibonos, bondes and bondes D.Source: Banco de México.

Source: Banco de México and International Monetary Fund.

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

0

500

1,000

1,500

2,000

2,500

Mill

ares

May

Total

Bonds

CETES

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20-May

International reserves

IMF’s Flexible Credit Line

Non-resident government securities’ holdings reduced slightly.

20

Headline Inflation and Nominal Depreciation RateAnnual % change

Source: Banco de México and NEGI.

-50

0

50

100

150

200

250

300

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

20

08

20

11

20

14

April

Headline Inflation

FX Depreciation


20

16

Unlike in the past, recent exchange rate fluctuations have not affected the price formationprocess of the economy. Thus, inflation has stayed below the permanent target over the last 12months, despite the exchange rate performance.

2

3

4

5

6

7

8

9

10

11

12

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

1 day

10 years

30 years

1 year

3 months

Government Securities’ Interest Rates 1/

%Government Bond Yield Curve

%

1/ Since January 21, 2008, the one-day (overnight) interest rate corresponds to the target for theOvernight Interbank Interest Rate.Source: Banco de México and Proveedor Integral de Precios (PiP). Source: Banco de México and Proveedor Integral de Precios (PiP).

2 years


May2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

1 1 3 6 1 2 3 5 10 20 30

months yearsday

31-Mar-16

24-May-16

30-Sep-15

31-Dec-15

Short-term interest rates in Mexico reflected the increments in the reference interest rate that resultedfrom the monetary policy actions. In contrast and congruent with the anchoring of long-term inflationexpectations, long-term interest rates remained relatively stable.

0.2 0.5

-0.1

-1.9

-3.9

-1.0

2.1

1.7

1.3 1.4

0.9

0.8 1

.00

.91

.50

.8 0.8

1.5

0.3

0.9

0.5

-1.0

1.2

0.4 0.5

0.8

0.5 0

.70

.5 0.6 0

.80

.5 0.8

-5

-4

-3

-2

-1

0

1

2

3

4

I 200

8

III 2

008

I 200

9

III 2

009

I 201

0

III 2

010

I 201

1

III 2

011

I 201

2

III 2

012

I 201

3

III 2

013

I 201

4

III 2

014

I 201

5

III 2

015

I 201

6

Gross Domestic ProductQuarterly % change, s. a.

Global Indicator of Economic ActivityIndex 2008=100, s. a.

s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.


1Q 201680

90

100

110

120

130

140

150

90

95

100

105

110

115

120

125

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16


March

Services

Total

Industrial

Agricultural

In 1Q 2016, the growth of the Mexican economy was greater than in the previous quarter.

80

90

100

110

120

130

140

150

90

95

100

105

110

115

120

125

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

23

Revenues of Commercial Retail Businessand Total ANTAD SalesIndex 2008= 100, s. a.

Workers’ RemittancesBillion, constant USD and MXN 2/, s. a

AprilMarch

ANTAD 1/

Revenues of Commercial

Retail Business

s. a./ Seasonally adjusted data.

2/ Prices as of the second fortnight of December 2010.

Source: Banco de México.


1/ It refers to total sales.

Source: INEGI and elaborated by Banco de México with data from ANTAD.

12

17

22

27

32

37

42

1.6

1.8

2.0

2.2

2.4

2.6

2.8

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

March

USD

Pesos

Domestic Light Vehicle Retail SalesThousands of units, annualized, s. a.


Source: Prepared by Banco de México with data from the Mexican

Automotive Industry Association (AMIA).

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

April


Most private consumption indicators suggest that it continued registering a favorabletrajectory in 1Q 2016.


24

85

90

95

100

105

110

115

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

IMSS-Insured Jobs, Employed Population and Total IGAE Index 2012=100, s. a.

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

March

National Unemployment Rate % of EAP, s. a.

s. a. / Seasonally adjusted data.1/ Permanent and temporary workers in urban areas. Seasonally adjusted by Banco de México.Source: Calculated by Banco de México with data from IMSS and INEGI (SCNM and ENOE).

EAP/ Economically active population.s. a. / Seasonally adjusted data.Source: National Employment Survey (Encuesta Nacional de Ocupación y Empleo), INEGI.

AprilMarch

1Q-2016

IMSS-affiliated Jobs 1/

Employedpopulation

Total IGAE

Although most labor market indicators showed an improvement, certain slack conditionsstill prevail.


25

70

75

80

85

90

95

100

105

110

115

60

80

100

120

140

160

180

200

220

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Total

Investment and its ComponentsIndex 2008=100, s. a.

80

85

90

95

100

105

110

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Investment in Residential andNon-residential Construction

Index 2008=100, s. a.



February

National machinery and equipment

Construcción

Imported machinery and equipment

Non-residential

Residential

February

Gross fixed investment continued showing a weak performance, although at the marginthere was a rebound in construction.

10

30

50

70

90

110

130

150

170

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Oil and Non-oil ExportsIndex 2008=100, s. a.

50

70

90

110

130

150

170

190

210

230

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Manufacturing ExportsIndex 2008=100, s. a.

s. a. / Seasonally adjusted data.Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG. NationalInterest Information, and Banco de México with data from PMI Comercio Internacional. S.A. de C.V.

s. a. / Seasonally adjusted data.Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG. NationalInterest Information.

April

Total

Non-automotive

Automotive

Total exports

Non-oil exports

Oil exports

April


External demand continued exhibiting an unfavorable performance. Hence, bothmanufacturing and crude oil exports kept showing a negative trend.

27

OECD Countries ExportsAnnual % change

Source: Organization for Economic Cooperation and Development (OECD).Quarterly Report

January - March 2016

Australia -1.3 -2.9 -2.8 1.3 1.1 -4.1 -3.8 -12.5 -20.1 -23.3 -22.0 -21.6 Austria 1.8 3.8 4.5 8.1 6.0 7.6 1.0 -6.0 -15.4 -19.2 -12.7 -10.1 Belgium 0.1 2.5 9.4 9.6 4.2 7.3 1.2 -9.1 -17.3 -17.3 -16.6 -10.3 Canada -0.1 0.7 0.7 0.9 -1.5 5.3 8.9 2.4 -8.0 -14.0 -15.7 -16.8 Chile -4.9 1.5 5.8 -7.9 2.5 -2.0 -3.5 -4.5 -10.7 -19.0 -19.3 -19.2 Czech Republic -4.1 1.0 5.5 10.4 13.8 13.6 5.6 -1.3 -12.3 -13.1 -7.8 -4.4 Denmark 2.0 0.0 7.7 6.6 4.4 7.4 -0.6 -8.6 -12.8 -16.9 -16.3 -12.0 Estonia 4.4 5.2 -4.8 1.8 -4.4 0.7 3.0 -5.1 -18.7 -20.1 -21.9 -17.9 Finland -2.4 -0.5 1.5 6.9 0.4 7.7 1.3 -9.3 -19.5 -21.7 -20.4 -17.0 France -0.5 2.0 2.5 4.6 2.0 3.6 0.1 -5.7 -14.8 -14.1 -12.5 -10.3 Germany -0.0 0.8 3.9 7.1 5.4 7.6 4.4 -3.3 -11.6 -12.9 -11.1 -9.7 Greece 8.6 7.8 9.0 -9.8 2.3 -0.9 -4.0 -1.5 -20.9 -19.9 -24.3 -18.5 Hungary -0.3 1.9 5.4 10.8 8.7 9.6 3.8 -5.6 -11.3 -13.3 -11.1 -6.4 Iceland -0.7 -4.9 4.6 0.3 -2.6 1.1 5.0 0.4 3.0 7.3 -17.6 -13.5 Ireland -7.3 0.3 -1.0 6.3 5.2 8.5 4.4 1.5 -0.1 -0.9 0.3 2.7Israel 5.5 5.6 -3.2 14.0 8.6 -3.6 9.3 -8.3 -8.5 -5.9 -12.0 -2.2 Italy 1.1 1.5 4.6 5.0 5.1 6.8 1.7 -5.2 -14.2 -15.9 -14.0 -10.2 Japan -12.4 -12.9 -10.4 -5.6 -4.1 -2.7 -1.7 -5.5 -5.1 -9.7 -12.5 -10.5 Korea -0.3 1.3 3.1 4.3 1.2 3.5 3.7 0.7 -3.0 -7.1 -9.5 -12.0 Luxembourg -18.1 -2.2 6.9 9.8 12.8 8.6 5.2 -8.8 -13.5 -9.8 -12.3 -6.8 Mexico 0.4 2.0 4.5 2.6 3.1 5.9 4.4 5.0 -0.6 -4.2 -4.0 -6.7 Netherlands 2.0 -0.1 5.1 2.8 1.5 6.3 1.0 -7.2 -17.1 -17.3 -15.6 -13.0 New Zealand 3.2 1.1 0.5 16.9 18.3 15.9 2.9 -11.4 -19.3 -17.8 -17.0 -16.4 Norway -8.9 -3.9 2.2 -0.6 2.0 -4.8 -9.1 -17.0 -30.1 -25.0 -25.0 -27.2 Poland 7.4 10.3 12.5 11.9 13.3 13.8 3.7 -0.5 -11.0 -12.8 -9.8 -5.8 Portugal 2.5 7.7 10.8 11.3 5.2 5.0 1.5 -4.4 -13.5 -14.9 -14.0 -11.5 Slovak Republic 4.7 5.1 5.6 9.9 9.8 5.3 0.7 -9.8 -16.2 -16.9 -11.8 -6.5 Slovenia 3.0 2.1 7.7 9.6 8.3 9.0 5.9 -2.2 -12.2 -13.7 -12.6 -8.5 Spain 7.3 8.7 8.6 4.9 3.4 6.2 3.0 -4.7 -13.0 -15.6 -13.8 -8.7 Sweden -4.3 -3.7 -3.0 -0.5 1.2 2.3 -2.0 -8.3 -18.7 -16.3 -15.1 -8.5 Switzerland -2.0 2.3 2.8 2.8 9.6 6.8 5.1 -1.4 -7.7 -9.1 -9.6 -2.7 Turkey 5.5 -2.3 -5.4 0.2 7.0 5.0 3.0 -0.3 -7.7 -8.9 -11.9 -6.9 United Kingdom -2.9 4.0 -1.8 1.8 5.0 1.4 0.7 -3.7 -12.1 -7.1 -9.9 -9.6 United States 1.6 1.0 1.5 4.3 2.1 3.5 4.3 0.8 -4.5 -5.8 -7.9 -10.3

Total OCDE -0.6 0.4 2.1 4.0 3.3 4.7 2.4 -3.5 -10.7 -12.1 -11.9 -10.5

2015-IV2013-I 2013-II 2013-III 2013-IV 2014-I 2014-II 2014-III 2014-IV 2015-I 2015-II 2015-III

This occurred in a context of a widespread decrease in export activity in the main worldeconomies.


28

Imports by Type of GoodIndex 2008=100, s. a.

Trade BalanceMillions of dollars

s. a./ Seasonally adjusted data.Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG.National Interest Information.

Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG.National Interest Information.

50

70

90

110

130

150

170

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Consumption goods

Capital goods

April

Intermediate goods

-10,000

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

1Q 2016

Total

Oil

Non-Oil

In an environment of weak global trade, imports in Mexico stagnated and the trade balancedeficit increased, mainly as a consequence of the crude oil trade balance performance.

-10

-8

-6

-4

-2

0

2

4

6

82

00

6

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

29

Output Gap 1/

% of potential output, s. a.

s. a. / Calculated with seasonally adjusted data.1/ Estimated using the Hodrick-Prescott (HP) filter with tail correction method; see Banco de México (2009), “Inflation Report April–June 2009”,p.69.The shaded area is the 95%confidence interval of the output gap, calculated with an unobserved components method.Source: Calculated by Banco de México with data from INEGI.

GDP

IGAE

March1Q-2016


Thus, so far in 2016 slack conditions, even though decreasing, have prevailed in the economy.

Outline


Monetary Policy1




-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4


31

Fan Chart: Output Gap% of potential output, s. a.

s. a./ Seasonally adjusted data.Source: Banco de México.

GDP Growth(%)

Report Previous Current

2016 2.0 – 3.0 2.0 – 3.0

2017 2.5 – 3.5 2.3 – 3.3

Increase in the number of IMSS-insured jobs(Thousands)


2016 610 – 710 590 – 690

2017 650 – 750 630 – 730

Economic Activity Outlook

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2015Q4

2016 Q4

2017Q4

Current Account Deficit(% of GDP)


2016 2.9 3.1

2017 2.9 3.1

The possibility of a more pronounced slowdown of the world economic growth and, in particular, of the U.S.industrial activity.

That, in light of a more complex international environment, financing conditions would become tighter, whichcould affect investment plans.

A greater dynamism of private consumption over the next quarters.

Risks to the Growth Outlook

Downward

Upward


That the implementation of structural reforms would produce more favorable and faster effects thananticipated by the market.

Inflation Outlook


Core inflation

20

16

That over the next months it will remain under3 percent and in the last months of the year itwill temporarily exceed this figure. For the yearas a whole, average annual inflation isexpected to lie practically at 3 percent.

Headline inflation

20

17

That they will persist around the permanent inflation target.

That it will gradually increase in annual terms,concluding 2016 at levels close to 3 percent.

Annual Headline Inflation 1/

%Annual Core Inflation 2/

%

1/ Quarterly average of annual headline inflation.Source: INEGI and Banco de México.

2/ Quarterly average of annual core inflation.Source: INEGI and Banco de México.

Fan Charts

2015 Q4

2017 Q4

2016 Q4

2015 Q4

2017 Q4

2016 Q4

2006 2007 2009 2011 2013 2015 2016 2017


2006 2007 2009 2011 2013 2015 2016 2017

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4

Observed

Headline Inflation Target

Variability Interval

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4

Observed

Headline Inflation Target

Variability Interval

Inflationary conditions in the economy are anticipated to remain favorable, so that inflationwill continue fluctuating around its permanent target.

Downward Upward

That the international environment willdeteriorate, thus leading to a disorderlydepreciation of the exchange rate.

35

That as a result of structural reforms, drops inthe prices of some generalized-use inputs willcontinue, such as telecommunication servicesand energy prices.


Risks to Inflation Outlook

That Mexican and global economic activity willhave a lower than expected dynamism.

Increments in agricultural products’ prices cannotbe ruled out, although their impact on inflationwould tend to be transitory.


36

Monetary Policy Stance

Considering the facts presented in this Report, the Board of Governors will closely monitor theevolution of all inflation determinants and its medium- and long-term expectations, especially:

The exchange rate and its possible pass-through onto consumer prices.

The monetary stance of Mexico relative to that of the U.S.

The evolution of the output gap.

→ All this, in order to be able to take the necessary measures in a flexible manner and whenever conditionsdemand it, so as to consolidate the efficient convergence of inflation to its 3 percent target.


37

Strengthening Confidence in the Mexican Economy

In the future, Mexico will be facing an adverse external environment that will represent athreat to economic growth and possible pressures on inflation.

In this context, it is crucial to preserve the macroeconomic strength, adjusting in a timelymanner the monetary and fiscal stances.

Likewise, it is necessary to continue encouraging domestic sources of growth, so that notonly the sluggishness of global demand is offset, but also so that higher economic growthrates are achieved in a sustained manner. The efficient implementation of structural reformsis of utmost importance.

Documents

Presentación de PowerPoint · February 4, 2016 February 17, 2016 Extraordinary session Rate unchanged at 3.25%. 50 bp increase to 3.75%. Quarterly Report January - March 2016 3 The