a central banker in the eye of the storm

What would you ask Agustín Carstens? The former governor of the Bank of Mexico is in the eye of the storm that central bankers are experiencing. The eye of the storm is the region of the calmest weather conditions, around which there are fierce winds and heavy rains. Agustín Carstens lives in Switzerland. He is the director of the Bank for International Settlements, the BIS, known as the central bank of central banks in the world. This is where the global inflationary crisis is processed in a unique way. It is an unprecedented phenomenon, which hits hard in rich and poor countries. It is something that puts the relationship between central bankers, the political class and societies around the world in tension, “these are difficult times, for circumstances like this the autonomy of central banks was thought. Not for the times where everything is fine and calm. In difficult moments is when autonomy can make a difference. It is important that central banks provide a vision that goes beyond the short term”.

He is sitting at the head of the table. It’s a Mexican breakfast and he orders a barbacoa taco for dessert. He has been living in Basel since the end of 2017 and it is clear that he misses Mexican food. He was in CDMX to hold a BIS regional meeting. He has a little more gray. He is frugal and prudent when he talks about Mexico, but he is in front of a group of journalists that puts pressure on him. He praises the role played by Alejandro Díaz de León and Victoria Rodríguez Ceja at the head of Banxico, “each one has done an excellent job. Everyone has their style.”

The topics come and go in a conversation that lasts two hours and overlaps with the game between Mexico and Poland. Martinoli’s voice comes to us in waves and sometimes washes over us, but we don’t miss a thing. The X-ray of the Superweight made by Carstens is much more interesting than a match without goals. Agustín Carstens has experienced Mexico’s recent economic history firsthand and has the ability to put things in perspective. In 1994, there was also a very strong peso, but the situation was very different, he recalls: “Banco de México was committed to defending a level exchange rate and the government was willing to do almost everything to prop up the value of the peso, for example, issuing billions of dollars in Tesobonos… now, the strength of the peso is not related to government interventions. The Bank of Mexico does not spend the reserves either…”

The issues are linked and minutes later we find ourselves talking about the rate differential between Banxico and the Fed. Is it necessary to maintain the six points? His response goes far beyond the short term, “it is likely that in the coming months we will first see the effects of rate hikes on the slowdown of the economy than on reducing inflation. It will be very interesting to observe what will happen then… I am optimistic that we will soon see lower inflation, I think we could be at levels of 4 or 5%, but it will be difficult to go from there to 2% or less”.

Agustín Guillermo Carstens has just turned 64 years old. He has received many awards, including Best Governor of a Central Bank, by The Banker magazine, in 2012. In the coming days he will receive the King of Spain Economics Award. 30 years ago, another Mexican had that distinction, Miguel Mancera. He remembers that he then participated in the elaboration of the reception speech. The theme was the role of economic openness in controlling inflation. “Banco de México was a promoter of this opening, it brought more competition and market discipline in many branches of the economy.” He anticipates that his speech will deal with the challenges of central banks. One of those has to do with cryptocurrencies. “People expect central banks to play a bigger role on issues related to innovation. What is happening with Bitcoin and other cryptocurrencies, with the bankruptcy of FTX makes it clear that in many cases the supposed monetary decentralization is false. Companies like FTX play a central role and are not subject to any rules… At the BIS we have innovation labs and we are working with central banks to respond to a reality where many people want digital currencies. The challenge is technological and regulatory, it is very important to resolve the balance between privacy and the obligations that may exist in tax or security issues”. Last night he flew to Switzerland. That place so calm that he is so close, in the very eye, of the storms.

lmgonzalez@eleconomista.com.mx