Economics: As the monetary rate rises, bank credit continues to expand
With the recent hikes in monetary policy interest rates in leading economies at a time of persistently high inflation, central bank authorities have signaled that we are facing a prolonged period of elevated interest rates. Such warnings from the Federal Reserve are of particular significance to Mexico as the country’s monetary policy in recent years has been one of anticipating and matching the decisions of the Federal Reserve. The odds of a high rate scenario locally appear all the more likely as inflation in Mexico remains high.
Despite the extent to which the cost of credit has risen recently, as of the third quarter we witnessed an expansion of bank loan portfolios in response, in part, to the economic recovery witnessed on the level of both consumption and company revenues, but also to the contraction in non bank credit, which has run up against greater funding supply obstacles in recent years, including that some of the Multiple Purpose Financial Companies (Sofoms) accounting for a significant share of the market have been pushed into bankruptcy.
This shift has cleared the way for a restructuring of the market toward bank sources. In this way, the main banks have been able to issue credit bearing higher interest rates at the same time as they have lowered their delinquency rates, which has helped them deliver much stronger results for the third quarter of the current year.
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