97 years of Banco de México: Challenges and strengths from the perspective of experts

Challenges and strengths after almost 30 years of autonomy

In almost 30 years of autonomy, the Central Bank has managed to reduce inflation to double-digit levels (and more) in the 1980s at low and much more stable levels, which, in turn, has allowed for a long time economic actors in general to make decisions without worrying about what will be the price level that will prevail in the future .

His actions and continuous efforts to follow the best practices in his decision-making have allowed, for example, that we Mexicans move from an economy in which a large part of the fluctuations in the exchange rate were transmitted practically one by one to prices. , or in which the setting of prices was at risk of following inflationary spirals, to another in which the inflationary dynamic is “anchored” via inflation expectations.

We cannot forget that Beyond its role as monetary authority, the Bank has also accompanied the transformation of the financial system to a more resilient one and has fostered the development and modernization of the country’s payment systemthus providing basic elements for economic activity.

The current economic environment causes the Bank to face numerous challenges. The number one challenge, without a doubt, is to put the economy on a path in which inflation and its expectations are reduced and return to levels consistent with its 3% inflation target.

The fact that the current Governing Board has, as a whole, less experience in monetary policy than its predecessors, will be another important challenge to overcome, especially as it becomes more evident that the rate hike cycle is soon to conclude and that it is necessary to continue going through an economic environment of high uncertainty. An additional challenge in this regard is that of preserving institutional strength, which privileges the objective of price stability under any circumstances and ignores political agendas.

This strength should not be taken for granted: we have an economy that copes with adverse environments with relative effectiveness thanks largely to the strength of its Central Bank.

These challenges will probably be better overcome in the future given the institutional scaffolding that the Bank has been in charge of building for years and that I consider its main strength: the established rules, a high-quality staff, professional and committed to their work, and the vigilance of all those we observe from the outside, citizens and participants in the financial markets, are the best recipe to keep Banco de México as a an institution of excellence, a pillar of the economy.

Jessica Roldán Peña, Chief Economist Casa de Bolsa Finamex