National Commission

It was assumed that external factors were going to complicate the performance of the Mexican economy this year, but did not expect that the main factor that would hit the Mexican economy was the rise in international prices of food and energy. Rather, the slowdown in the U.S. economy was the factor that expected, more hit to Mexico during this 2008. It is true that last Friday, the Bank of Mexico, climbed its benchmark interest rate by a quarter point to take it to 8%, after recognizing that it has worsened the inflationary Outlook. This was the second consecutive increase which decides the Monetary Authority. In addition, Banxico, said it will review upwards their projections for inflation, at the time seen as a difficult compliance goal reaching an inflation of 3.0 by the end of 2009%, as it had predicted earlier. The increase in rates of interest from Banxico, not took the market by surprise.

For the Ixe, Luis Flores, senior analyst the expectation of a further increase in the domestic interest rate was already discounted by the market, but stressed that what is surprising is the fact that within the statement mentions the prospect of more monetary tightening. As it is logical, the increase in interest rates has affected the generation of credit to the private sector, in particular, that of short term. According to the information that can be obtained from the National Commission for the defense of the users of financial services (Condusef) thereon, so far this year, the rate they charge credit cards has risen 8% on average. This undoubtedly is adversely affecting domestic demand in Mexico. Thus, restrictive monetary policy is affecting to a greater extent to economic activity that inflationary pressures. And if the inflationary issue was the only problem, industrial activity fell unexpectedly by 1.2% during the month of May. This was a product of the strong decline in the mining sector and the fall in the in the construction sector.