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Quarterly Report
April June 2015

August 12, 2015
1
1
Outline
1
Monetary Policy
External Conditions
Economic Activity in Mexico
Inflation Determinants
Forecasts and Balance of Risks

Quarterly Report
April-June 2015
Monetary Policy Conduction in Mexico

The conduction of the monetary policy seeks to ensure the stability of
the national currencys purchasing power.
This, ensuring that it is achieved at the lowest cost to society in terms of economic
activity, at all times.
As a result of Banco de Mexicos effort to curb inflation, during 2015

convergence of inflation to its permanent 3 percent target has been
achieved.
Moreover, during 2Q 2015, it even reached its historic minimum levels and has
recently remained below the target.
The above took place in a context in which the pass-through of the exchange rate
depreciation onto prices has been limited, mainly reflected in the prices of durable
goods, and without contaminating prices of non-tradable goods and services.
Quarterly Report
April-June 2015
The convergence of inflation to its target has been achieved in a particularly

complex environment, given the circumstances faced by the monetary
policy.
Domestic Environment:
International Environment:
Low growth rate of economic activity.
High volatility in international financial

markets.
The imminent beginning of the
normalization of the U.S. monetary policy.
Favorable inflation evolution.

Well-anchored long-term inflation
expectations and reductions in the
short-term ones.
Lower commodity prices, in particular

crude oil prices.
A considerable depreciation of the

Mexican peso against the U.S. dollar.
Quarterly Report
April-June 2015
During the period covered by this Report, the Board of Governors maintained
the target for the Overnight Interbank Interest rate unchanged at 3 percent,
by virtue of the fact that it estimated the current monetary stance to be
conducive to ensure the convergence of inflation to its 3 percent target.
Target for the Overnight Interbank Interest Rate1/
%
10
August
8
7
6
5
4
3
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2
1/ The Overnight Interbank Interest Rate is shown until January 20, 2008.
Source: Banco de Mxico.
Quarterly Report
April-June 2015
Outline
1
Monetary Policy
External Conditions

Quarterly Report
April-June 2015
Although the world economic activity recovered moderately in 2Q 2015,

global industrial production and the volume of international trade
decreased.
Industrial Production
Quarterly change of 3-month moving
average in percent, s. a.
Emerging
Trade Volume
Quarterly change of 3-month moving
average in percent, s. a.
10
6
4
Emerging
2
0
Advanced
World
World
-2
Advanced
-5
-4
-6
-10
-8
s. a./ Seasonally adjusted data.

Source: Haver Analytics.
May
-15
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
-10
2005
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
May
s. a./ Seasonally adjusted data.

Quarterly Report
April-June 2015
Commodities prices exhibited high volatility in 2Q 2015, and by the end of

the referred quarter they decreased again.
Crude Oil Prices
USD per barrel
Commodities Prices
Index 2005=100
145
Futures1/
300
Industrial Metals
130
250
115
200
100
85
WTI
150
Total
Food
70
100
Energy
55
Mexican Oil Mix
50
40
2014
2013
2012
2011
2010
2009
2008
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
1/ Data up to August 11, 2015.

Source: Bloomberg.
2015
July
25
Source: International Monetary Fund.
Quarterly Report
April-June 2015
U.S. economic activity maintained a moderate growth rate. Nevertheless, the

industrial sector registered weakness.
11
Change in Non-farm Payrolls and

Unemployment Rate
Thousands of jobs and % of EAP, s. a.
10
Percent change, s. a.
15
600
400
10
Annual change
9
200
8
7
-5
-200
-10
Unemployment rate
Change in nonfarm payrolls
-25
2013
2009
-30
2015
June
-800
2007
2014
2013
2012
2011
2010
2009
2008
2007
2015
July
EAP/ Economically Active Population.

s. a. / Seasonally adjusted data.
Source: Bureau of Labor Statistics (BLS).
-20
-600
2005
-15
Annual Change
of 3-month
-400
2011

Quarterly Report
April-June 2015
In 2Q 2015, economic activity in the Euro zone kept recovering at a moderate

pace, particularly as a reflection of an extremely loose monetary policy.
Retail Sales1/
Index December 2007=100, s. a.
110
France
Germany
Unemployment Rate
Percentage of EAP, s. a.
30
105
25
Spain
100
Euro Zone
20
95
Italy
Ireland
Portugal
Ireland
90
15
85
10
Euro
Zone
80
Italy
Spain
s. a. / Seasonally adjusted figures.

1/ Car sales excluded.
Source: Eurostat.
Germany
2014
2013
2011
2010
2009
2008
2015
June
70
2007
2015
2014
2013
2012
2011
2010
2009
2008
2007
June
France
5
75
2012
Portugal
s. a. / Seasonally adjusted figures.

EAP/ Economically Active Population.
Source: Eurostat.
Quarterly Report
April-June 2015
10
Given lower commodities prices, the activity in emerging economies

continued weakening in 2Q 2015.
Annual change of 3-month moving
average in percent
June
May
May
Exports
Annual change of 3-month moving
average in percent
35
80
June
July
July
30
60
25
Korea
India
20
South
China Africa
15
China
India
Russia
Mexico
40
10
Korea
South
Africa
20
Mexico
Brazil
-20
-5
Brazil
Russia
2015
2014
2013
2012
2011
-40
2010
2015
2014
2013
2012
2011
2010
-10
Source: Bloomberg and INEGI.
Quarterly Report
April-June 2015
11
The Federal Reserve is expected to start the normalization process of its

monetary policy before the year ends. In light of this, the U.S. dollar
appreciated against practically all currencies.
Advanced Economies: Expected
Monetary Policy Rates 1/
%
Implied target rate in
OIS Curve
End of 2015
End of 2016
U.S. Dollar Index (DXY) 2/

Index 1-Jan-2013=100
1.8
August
1.6
102
99
1.4
96
1.2
European Central Bank

Bank of
England
93
1.0
Depreciation
0.8
90
0.6
87
0.4
84
Federal Reserve
Bank of Japan
0.2
81
0.0
1/ The expected rates are the trajectories implicit in OIS Curves (Overnight Index
Swap). Source: Bloomberg with estimates from Banco de Mxico.
Feb-15
Apr-15
Jun-15
Aug-15
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
78
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
-0.2
2/ DXY index is estimated by the Intercontinental Exchange (ICE) based on the

weighted geometric mean of the dollar's value compared with a basket of 6 other
major currencies which are: EUR: 57.6%, JPY: 13.6%, GBP: 11.9%, CAD: 9.1%, SEK:
4.2%, and CHF: 3.6%. Source: Bloomberg.
Quarterly Report
April-June 2015
12
In this setting, emerging economies registered lower capital inflows.

Accumulated Capital Flows to Emerging Economies
(Debt and Equity) 1/
Billions of dollars
140
2010
120
100
2012
80
60
2009
40
20
2014
2015
-20
2011
Aug-05
2013
-40
-60
2008
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
-80
Weeks
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 exchange rate.
Source: Emerging Portfolio Fund Research.
Quarterly Report
April-June 2015
13
Emerging economies currencies depreciated significantly.

Emerging Economies: Nominal Exchange
Rate against USD
Index 01-Jan-2013 = 100
175
2014
170
165
160
Colombia
155
150
145
South Africa
140
135
130
125
Chile
120
115
Mexico 110
105
100
95
Korea
August
90
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Brazil
Source: Bloomberg.
6.50
Depreciation
6.40
6.30
6.20
6.10
6.00
August
5.90
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Depreciation
China: Exchange Rate

Yuan per USD
Source: Bloomberg.
Informe Trimestral
Abril Junio 2015
14
Outline
1
Monetary Policy
External Conditions

Quarterly Report
April-June 2015
15
In 2Q 2015, economic activity in Mexico continued exhibiting a low growth

rate.
Economic Activity Indicators
Index 2008 = 100, s. a.
Mining Sector
Index 2008=100, s. a.
125
122
Services IGAE
Electricity
118
120
114
115
Total IGAE
102
100
100
98
95
94

Source: Mexicos System of National Accounts, INEGI.
80
Construction
2014
2013
2012
2011
2010
2009
85
2015
June
2008
Services related to
mining
90
90
2015
2014
2013
2012
2011
2010
2008
2009
Agricultural IGAE
80
90
85
Mining
June
May
100

Quarterly Report
April-June 2015
60
Crude oil mining

June
80
40
2015
110
90
95
2014
105
2013
Manufactures
2012
106
2011
120
120
110
110
Industrial
production
140
100
2010
140
105
160
Mining of metal
and non-metal
minerals
2008
150
130
110
2009
160
Industrial Activity
Index 2008 = 100, s. a.

Source: Monthly Indicator of Industrial Activity,
Mexicos System of National Accounts, INEGI.
16
Exports registered a weak performance.

Oil and Non-Oil Exports
Index 2008=100, s. a.
Manufacturing Exports
Index 2008=100, s. a.
160
230
Non-oil exports
210
Automobile
140
190
120
Total
170
150
100
130
80
110
Non-Automobile
Oil exports
90
60
70
June
June

2015
2014
2013
2012
2011
2010
2009
2008
50
2007
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
40
s. a./Seasonally adjusted data.

Quarterly Report
April-June 2015
17
Investment presented a lower dynamism, as compared to that observed in

previous quarters.
Investment and its Components
Index 2008=100, s. a.
Residential and Non-Residential

Construction Investment
Index 2008=100, s. a.
150
110
70
Business confidence
index
Non-residential
140
National
machinery and
equipment
Business Confidence Index

Index with respect to 50 points, s. a.
60
105
130
50
120
100
40
110
Total
95
100
90
90
20
85

Source: Mexicos System of National Accounts,
INEGI.
Quarterly Report
April-June 2015
2014
2013
2012
2011
2009
2008
2015
July
80
2007
2014
2013
2012
2011
2010
2009
2008
2015
2014
2013
2012
2011
2010
2009
2008
2015
May
60
10
Residential
70
May
2007
Right moment to
invest component
80
Imported
machinery and
equipment
2010
Construction
30

Source: INEGI.
18
In turn, private consumption kept recovering at a moderate pace.

Monthly Indicator of Private
Consumption in the Domestic
Market and ANTAD Total Sales
Index 2008=100, s. a.
140
135
Consumer Confidence
Index Jan-2003=100, s. a.
Commercial Bank Performing

Credit to Consumption 1/
Real annual % change
130
115
125
110
120
105
40
30
ANTAD
130
125
20
115
100
115
110
95
10
110
105
90
100
85
-10
90
75

Source: INEGI and prepared by Banco de Mxico
with ANTAD data.
Quarterly Report
April-June 2015
June
2013
2012
70
2011
2014
2013
2012
2011
2010
2009

Source: INEGI and Banco de Mxico.
2015
July
85
2008
2015
2013
2012
2011
2010
2009
2008
2007
85
2014
July
May
2007
90
-20
-30
2015
80
2014
95
95
2010
100
2009
Private
consumption
2008
105
2007
120
1/ It includes loans by credit card-regulated sofomes.

19
In 2Q 2015, slack conditions persisted in the labor market, in a context in

which some indicators no longer showed the improvement they had been
exhibiting since 2014.
IMSS-Affiliated Jobs, Employed
Population and Total IGAE
Index 2012=100, s. a.
7.0
112
109
6.5
106
6.0
103
5.5
5.0
4.5
4.0
June
EAP/ Economically active population.

Source: National Employment Survey
Nacional de Ocupacin y Empleo), INEGI.
Quarterly Report
April-June 2015
(Encuesta
2015
2014
2013
2012
2011
2010
2015
2014
2013
2012
2011
2010
2009
2008
3.0
2007
2015
2014
2013
2012
2011
2010

1/ Permanent and temporary workers in urban areas.
Seasonally adjusted by Banco de Mxico.
Source: Calculated by Banco de Mxico with data from
IMSS and INEGI (SCNM and ENOE).
3.5
85
2009
94
1Q 2015
88
July
May
2008
97
91
2007
2009
Employed
Population
100
Total IGAE
2Q 2015
2008
IMSS-affiliated Jobs1/
IMSS Reference Wage 1/

Annual % change
National Unemployment Rate

% of EAP, s. a.
1/ During the second quarter of 2015, on average 17.7

million of contributors were registered to IMSS.
Source: Calculated by Banco de Mxico with data from
IMSS.
20
Outline
1
Monetary Policy
External Conditions

Quarterly Report
April-June 2015
21
In 2015, headline inflation converged to the permanent 3 percent target.

Moreover, since May 2015 it has even lied below the target, reaching
minimum historic levels.
Consumer Price Index
Annual % change
13
July
12
11
10
Non-core
Headline
8
7
6
5
4
3
2
Jul-15
Jan-15
Jul-14
Jan-14
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-13
Core
Variability interval
Source: Banco de Mxico and INEGI.

Quarterly Report
April-June 2015
22
The pass-through of the exchange rate depreciation onto prices has been
limited, mainly reflecting in the prices of durable goods and without
generating second round effects.
Core Price Index
Annual % change
Merchandise
Services
July
July
9
8
7
7
Education (tuition)
Merchandise
6
Non-durables
Services
4
3
Other services
Housing
Durables
2015
2014
2013
2012
-2
2011
2010
-1
2009
2008
2015
2014
2013
2012
2011
2010
2009
2008
Quarterly Report
April-June 2015
23
The non-core price index reduced its average annual growth rate between
1Q and 2Q 2015.
Non-Core index
Annual % change
Agricultural
Energy and Government Approved Fares

July
30
27
Energy and government

approved fares
Energy
24
21
Agricultural
15
July
18
12
15
Livestock
12
9
6
3
0
-3
-6
-9
-12
Jul-15
Jan-15
Jul-14
-3
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-09
Jan-09
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-10
Government approved fares
-15
Jan-10
Fruits and vegetables
Quarterly Report
April-June 2015
24
In the described environment, the output gap is still at negative levels.

However, if the economic activity registers greater dynamism, it will be
gradually closing.
Output Gap 1/
% of potential output, s. a.
8
6
4
GDP
2
0
-2
IGAE
-4
-6
-8
2015
2013
2012
2011
2010
2009
2008
2007
2006
-10
2014
May
1Q 2015
s. a. / Calculated with seasonally adjusted data.

1/ Estimated using the Hodrick-Prescott (HP) filter with tail correction method; see Banco de Mxico (2009), Inflation Report AprilJune 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 Mxico with data from INEGI.
Quarterly Report
April-June 2015
25
Long-term inflation expectations implicit in market instruments remained

stable, while the survey-derived ones decreased for shorter terms.
Annual Headline Inflation Expectations
Median, %
Break-even Inflation Decomposition 1/

%
Break-even inflation implicit in 10-year 3.08
bonds
Long-term inflation expectation
3.22
Inflationary risk premium
-0.14
8.0
5.0
7.0
4.5
6.0
Next 4 years
5.0
4.0
End of 2016
3.5
4.0
Next 5-8 years
End of 2015
3.0
3.0
2.0
2.5
1.0
Variability Interval
2.0
0.0
July
1/ The inflation risk premium is calculated with data from Valmer and Bloomberg,
based on the methodology described in Box 1 Decomposition of the Break-even
Inflation of the Quarterly Report October-December 2013.
1.5
2015
2014
2013
2012
2011
2010
2009
2008
2007
-1.0
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
July
Source: Survey of private sector economic analysts expectations, Banco de

Mxico.
.
Quarterly Report
April-June 2015
26
The adjustment in real terms of the national currencys exchange rate

facilitates the economys adjustment to the new international environment.
In a context of:
Well-anchored inflation expectations.
A low pass-through of exchange rate adjustments onto prices.
Efforts to ensure the fiscal consolidation.
The nominal exchange rate depreciation contributes to a more efficient

real exchange depreciation.
Informe Trimestral
Abril Junio 2015
27
The nominal exchange rate adjustment of the Mexican peso against the
U.S. dollar has been significant, although it occurred under orderly
conditions in the FX market.
Exchange Rate and its Expectations for the
End of 2015 and 2016 1/
Pesos per USD
Observed
16.32
End of 2015
15.65
End of 2016
15.30
Implied Volatility in Foreign

Exchange Rate Options 2/
%
16.5
20
16.0
18
15.5
16
15.0
14
14.5
14.0
12
13.5
10
13.0
12.5
6
12.0
1/ The observed exchange rate is the daily FIX exchange rate. The latest data for
the observed exchange rate is August 11, 2015, and the foreign exchange rate
forecasts is August 05, 2015.
Source: Banco de Mxico and Banamex survey.
August
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
11.5
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
August
2/ It refers to implied volatility in one-month options.

Source: Bloomberg.
Quarterly Report
April-June 2015
28
To reduce the probability that potential pressures on the exchange rate could
disrupt the proper functioning of this market in Mexico, the Foreign Exchange
Commission took various measures during the reference period.
International Reserves
USD billion
31-July
IMFs Flexible
Credit Line
300
Foreign Exchange Commission Preemptive

Steps to Provide Liquidity
to the FX Market:
280
260
240
220
200
International
Reserves
180
160
140
120
100
80
60
40
20
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
December 2014: Auctions of dollars of up

to USD 200 million at a minimum price.
March 2015: Daily auctions of USD 52
million without a minimum price.
May 2015: The extension until September

29, 2015 of the auction period of USD 52
million without a minimum price.
July 2015: The increment in the amount
of auctions without a minimum price from
USD 52 to 200 million, and the decrease
of the threshold from 1.5% to 1.0%, to
activate the auctions with a minimum
price. Both mechanisms are in force until
September 30, 2015.
Source: Banco de Mxico and International Monetary Fund.
Quarterly Report
April-June 2015
29
Interest rates increased for medium and long terms. However, government
securities holdings by foreign residents remained stable.
Government Bond Yield Curve
%
Government Securities Holdings by

Foreign Investors
MXN billion
7.0
2,400
Total 1/
6.5
2,000
6.0
11-aug-15
5.5
1,600
5.0
2Q-2015 Average
1Q-2015 Average
Bonds
1,200
4.5
4.0
800
CETES
3.5
400
3.0
2.5
10
20
30
years
Source: Banco de Mxico and Proveedor Integral de Precios (PiP).
July
2015
2014
2013
2012
months
2011
2010
2009
days
2008
1/Includes: Bondes, Bondes D, Bonos, Cetes and Udibonos.

Quarterly Report
April-June 2015
30
Outline
1
Monetary Policy
External Conditions

Quarterly Report
April-June 2015
31
Economic Activity Outlook

GDP Growth
9
8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
Increase in the Number of

IMSS-affiliated Jobs
2015
Between 1.7 and 2.5
2015
Between 560 and 660 thousand
2016
Between 2.5 and 3.5
2016
Between 600 and 700 thousand
GDP Growth
Annual %, s. a.
2014 2015 2016
T4
T4
T4
Fan Charts
9
8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
Output Gap
% of potential output, s. a.
2014 2015 2016

Q4 Q4
Q4
6
5
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
-6
-6
-7
-7
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2008
2010
2012
2014 2015 2016
2008
s. a. / Seasonally adjusted data. Source: INEGI and Banco de Mxico.
s. a. / Seasonally adjusted data. Source: Banco de Mxico.
Quarterly Report
April-June 2015
2010
2012
2014 2015 2016
32
Risks to the Growth Outlook:

Upward:
A greater dynamism of the exports sector, given a greater than expected

recovery of external demand and a real exchange rate depreciation.
.
Rapid
progress in the implementation of structural reforms and in the
strengthening of the rule of law.
Downward:
That manufacturing exports will keep registering a low dynamism, if the

U.S. industrial sector maintains a weak performance.
A deterioration in investors outlook.
That the recovery of the national oil production in Mexico will be delayed.
A further increase in international financial markets volatility.

Quarterly Report
April-June 2015
33
Inflation Outlook
2015
Core Inflation
Below 3 percent for the rest of the year.
2016
Headline Inflation
At levels close to 3 percent.
Quarterly Report
April-June 2015
34
Inflation is estimated to continue with a favorable evolution for the rest of

the year and during 2016.
Fan Charts
7.0
Annual Headline Inflation 1/

%
Annual Core Inflation 2/

%
7.0
7.0
6.5
6.5
6.0
6.0
5.5
5.5
5.5
5.5
5.0
5.0
5.0
5.0
4.5
4.5
4.5
4.5
4.0
4.0
4.0
4.0
3.5
3.5
3.5
3.5
3.0
3.0
3.0
3.0
2.5
2.5
2.5
2.5
2.0
2.0
2.0
2.0
6.5
2014
Q4
6.0
2015
Q4
2016
Q4
2014
Q4
2015
Q4
7.0
2016
Q4
6.5
6.0
1.5
Observed
1.5
1.5
Observed
1.5
1.0
Headline inflation target
1.0
1.0
Headline inflation target
1.0
0.5
0.5
0.5
0.5
0.0
0.0
0.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2010
2011 2012 2013
2014 2015 2016
1/ Quarterly average of annual headline inflation.
0.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2010 2011 2012
2013 2014 2015 2016
2/ Quarterly average of annual core inflation.

Quarterly Report
April-June 2015
35
Risks to Inflation Forecast :
Downward
Upward
A still lower than expected

dynamism of economic activity.
Further reductions in energy prices

and/or
in
telecommunication
services prices.
Quarterly Report
April-June 2015
That the depreciation of the

Mexican peso increases and affects
non-tradable goods prices, which
could
contaminate
inflation
expectations.
36
Monetary Policy Stance

Domestic conditions
External conditions
The cyclical conditions of the economy

continue to show weakness, inflation has
remained below 3 percent and inflation
expectations are well-anchored.
Federal Reserve possible monetary policy

actions could have further repercussions on
the exchange rate, inflation expectations,
and, therefore, on the price dynamics in
Mexico.
Hence, Banco de Mxicos Board of Governors will monitor the

performance of all inflation determinants and its expectations in the
medium and long term, in particular:
The performance of the exchange rate.
The monetary policy stance of Mexico relative to the U.S.

The evolution of the degree of slack in the economy.
All of the above, in order to be able to take the necessary measures, flexibly and
when needed, to consolidate the convergence of inflation to the 3 percent target.
Quarterly Report
April-June 2015
37
Challenges to Strengthen Confidence in the Mexican Economy
In light of a complex international environment and the expectation that it

will persist in the future, it is of key to preserve a solid macroeconomic
framework.
The structural strengthening of public finances is required, which becomes more
relevant given a significant decrease in crude oil prices and production. In
particular, it is necessary that the public debt to GDP ratio stabilizes at sustainable
levels in the medium and long term.
Higher and sustainable growth rates. In order to achieve this it is necessary

to increase the productivity, which, in turn, requires clear progress in the
implementation of structural reforms.
The strength of institutions is crucial to back a good functioning of the

economy. For this reason Mexico should make an additional effort to
strengthen the institutions and the rule of law.
Quarterly Report
April-June 2015
38

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Quarterly Report

April June 2015

Economic Activity in Mexico

Forecasts and Balance of Risks

Monetary Policy Conduction in Mexico

As a result of Banco de Mexicos effort to curb inflation, during 2015

The convergence of inflation to its target has been achieved in a particularly

Low growth rate of economic activity.

High volatility in international financial

Favorable inflation evolution.

Lower commodity prices, in particular

A considerable depreciation of the

Economic Activity in Mexico

Forecasts and Balance of Risks

Although the world economic activity recovered moderately in 2Q 2015,

s. a./ Seasonally adjusted data.

s. a./ Seasonally adjusted data.

Commodities prices exhibited high volatility in 2Q 2015, and by the end of

Mexican Oil Mix

1/ Data up to August 11, 2015.

Source: International Monetary Fund.

U.S. economic activity maintained a moderate growth rate. Nevertheless, the

Change in Non-farm Payrolls and

EAP/ Economically Active Population.

s. a. / Seasonally adjusted data.

In 2Q 2015, economic activity in the Euro zone kept recovering at a moderate

s. a. / Seasonally adjusted figures.

s. a. / Seasonally adjusted figures.

Given lower commodities prices, the activity in emerging economies

Source: Haver Analytics.

Source: Bloomberg and INEGI.

The Federal Reserve is expected to start the normalization process of its

U.S. Dollar Index (DXY) 2/

European Central Bank

2/ DXY index is estimated by the Intercontinental Exchange (ICE) based on the

In this setting, emerging economies registered lower capital inflows.

Emerging economies currencies depreciated significantly.

China: Exchange Rate

Economic Activity in Mexico

Forecasts and Balance of Risks

In 2Q 2015, economic activity in Mexico continued exhibiting a low growth

s. a. / Seasonally adjusted data.

s. a. / Seasonally adjusted data.

Crude oil mining

s. a. / Seasonally adjusted data.

Exports registered a weak performance.

s. a. / Seasonally adjusted data.

s. a./Seasonally adjusted data.

Investment presented a lower dynamism, as compared to that observed in

Residential and Non-Residential

Business Confidence Index

s. a. / Seasonally adjusted data.

s. a. / Seasonally adjusted data.

In turn, private consumption kept recovering at a moderate pace.

Commercial Bank Performing

s. a. / Seasonally adjusted data.

s. a. / Seasonally adjusted data.

1/ It includes loans by credit card-regulated sofomes.

In 2Q 2015, slack conditions persisted in the labor market, in a context in

EAP/ Economically active population.

s. a. / Seasonally adjusted data.

IMSS Reference Wage 1/