In the twoyear horizon, surveys to both experts and businesses continue to forecast that inflation will be above 3% annually at that point, with figures that have also risen in recent months (figure 2). This has also led to more frequent price changes by firms in response to rising demand and costs over the last two years. Regarding activity, data for the second quarter and the beginning of the third suggest that the economy continued its adjustment process after the strong imbalances it accumulated in 2021. In the second quarter activity (excluding mining) fell by 0.5% quarter-on-quarter in its seasonally-adjusted series. This decline extended to July, where this component of activity fell 1.1% with respect to the previous month, also discounting seasonality. By sectors, the decline in trade stood out, and was partially offset by the increase in some services (figure 3). Private consumption continued to decline from its high levels of 2021. In the second quarter, seasonally-adjusted, private consumption fell by 2.4% quarter-on-quarter, somewhat more than expected. The decline was concentrated in goods, especially durables, coinciding with the sharp depreciation of the real exchange rate (RER) and a significant build-up of inventories. In fact, both business expectations as measured by the IMCE and the information gathered in the August Business Perceptions Report (IPN) suggest that in recent months inventories have grown more than expected (figure 4).
However, in a context where inflation has turned out to be higher than expected; where inflationary expectations remain above target; where the peso is weaker than normal; where the global inflationary problem has become more complex and there are doubts as to how policies to address it will affect the global economy and financial markets, we must acknowledge that the risk of experiencing a more persistent inflationary phenomenon is our primary concern. Monetary policy makers will remain attentive to these developments and, as I mentioned a few moments ago, future movements of the MPR will be contingent on them. Urgently resolving the inflationary problem does not imply that we should set aside our medium-term challenges. More than two years into the pandemic and almost three since the social unrest of October 2019, our economy has suffered a string of events that have put the effectiveness of our economic policy framework and the authorities' ability to react to the test. In addition to the inflationary effects, some of the measures adopted to deal with the effects of the pandemic generated significant costs in the local financial market. Withdrawals of pension funds reduced the size of long-term savings and possibly also the economy's capacity to react to external shocks, especially under conditions of high uncertainty. Therefore, the strengthening of financial markets should be an important item on the economic agenda.