Central Banking Week in Mexico

The most important thing in the recent Quarterly Inflation Report was the blunt statement: “Monetary policy is autonomous and responds to the constitutional mandate.”

Last week was very important for the central bank in Mexico. On the one hand, the Bank of Mexico’s Governing Board presented the Quarterly Inflation Report. And in addition, the press the following day broke the news that the President of the Republic would confirm the reappointment of Gerardo Esquivel as deputy governor in the central institute in 10 or 15 days. Hopefully it will be confirmed, for the benefit of the institution and the country!

Undoubtedly, the most important thing in the Quarterly Inflation Report was the blunt statement incorporated: “Monetary policy is autonomous and responds to the constitutional mandate.” This, by way of confirmation of the line of institutionality and compliance with the law that the new governor has marked since she began at the helm of the central institute. In the rest of the document, what should be highlighted is the technical capacity, which has become emblematic in the specialized action of our central bank. In this sense, it is worth highlighting, first of all, a responsible use of inflation forecasts, as a reference for the monetary policy stance.

Regarding the technical strength with which Banco de México operates, just two illustrative examples in the recent presentation of the Quarterly Inflation Report. The first, related to the important concept of “negative output gap”. That is why the margin between the observed level and the potential level of economic activity must be understood. And the trend narrowing of that margin is one of the factors that allow forecasting lower economic growth for Mexico in 2023. Regarding the conduct of monetary policy, the insistence on maintaining core inflation as the main monitoring indicator, index which is integrated, according to Deputy Governor Jonathan Heath, with “the prices most susceptible to the actions of monetary policy…”

In the presentation of the Quarterly Report there was a practically unanimous comment in the Governing Board on the location of the Mexican monetary policy with respect to that of the United States Federal Reserve. In this regard, the governor pointed out: “It is just one more element among all the factors that we consider…”

bdonatello@eleconomista.com.mx