Banxico increased the interest rate from 4.00% to 4.25%. We tell you what this decision means, and how it hurts or benefits you.
The Bank of Mexico, Banxico, is in charge of regulating the country’s monetary policy and controlling inflation levels. In particular, one of its functions is to keep the inflation independent one point above or below 3% per year. So in the event of variations or an economic crisis, you must create mechanisms and make decisions to avoid creating a mismatch in these parameters.
What is the reference interest and how does it work?
In order to keep inflation rates stable in the country, Banxico relies on the reference interest rate. which allows to fix the price of money. By doing this, Banco de México decides whether to increase or decrease the number of banknotes and coins in circulation.
For example, if Banxico decides to lower this interest rate, what it intends is to encourage consumption by the population, it encourages the creation of more loans, and there is an increase in fixed-income investments. However, by doing this there may be a greater risk of inflation, as there is more money in circulation, such as there is today.
On the other hand, if Banxico decides to increase the interest rate, the loans become a little more expensive, it makes fixed-income investments more attractive, and allows greater control over inflation by regulating and reducing the amount of money in circulation. .
How does the increase in the interest rate affect you?
A probable increase in your debts
If you are in debt, or you find yourself paying some credit, the rise in the reference interest rate could affect you and increase your debt. This is due to the fact that after this increase, banks and financial institutions make the necessary adjustments to raise their interests and adapt to the new measures.
You have the wrong idea, that lowering interest rates stimulates consumption and there is a reactivation of the economy; however, it also generates more inflation, so money loses purchasing power and ends up being worth less.
Your savings increase
If you have money saved in the bank, the increase in the interest rate benefits you, because your money recovers its purchasing power, so you have enough to buy more things. Only this will not be reflected immediately, but in a period of time of a few weeks.
Investments pay you more
If you have fixed income investments you get more money. Of course, there are also banks and banking institutions that, realizing this, reduce the possibilities of providing loans and financing.