Agustín Carstens, general director of the Bank for International Settlements, gave a speech on the 25th anniversary of the autonomy of Banxico.
Agustín Carstens returned to Mexico on Friday, now as general director of the Bank for International Settlements, to give a speech in the framework of the 25th anniversary of the autonomy of the Bank of Mexico (Banxico).
Carstens, who was governor of Banxico from January 2010 to November 2017, mentioned, among other things, that, although it is low, there is a risk of a global recession.
He also shared his four lessons on the 25 years of autonomy of Banxico, where he highlighted the synergy that the central bank should do with other institutions.
These are 10 phrases from Carstens on his return to Mexico.
1. “It is not necessary to trust. The central bank could be a victim of its own success. It is a great challenge to instill the mentioned conviction to the new generations. In Mexico, approximately 35 percent of the population has not lived in times of high inflation, of two or more digits “.
2. “There could be circumstances in which the central bank could be somewhat flexible in helping the government to pursue a better performance of the national economy, leading to greater benefits for society. If the issuing institute has the capacity to influence that so, without compromising the fulfillment of its priority objective, it should act accordingly. “
3. “The national and international macroeconomic context is always important for refined conduct of monetary policy, which tends to produce more positive comprehensive results for society, thus reaffirming the value of autonomy. It is my opinion that, in general terms, the Bank of Mexico has followed this pattern. “
4. “The efficiency in terms of economic growth with which low and stable inflation can be achieved is much greater if the synergies between the various economic policies are taken advantage of and if the limitations of each of them are recognized.”
. “As a country, you should aim to have a consistent macroeconomic framework that allows you to achieve potential growth with low and stable inflation, so you should seek maximum coordination at least among monetary, fiscal, exchange, financial, commercial policies and economic competition. “
6. “The autonomy of the central bank does not condemn it to isolation. This has become clear during the last twenty-five years. In this period an environment of low and stable inflation in the country has been consolidated. There is no doubt that monetary policy has done its part, but the results obtained also reflect effective coordination with other instances of government. “
7. “In order for society to believe in autonomy and support it, it must first understand it. For it to understand it, the central bank must explain clearly and tirelessly what it does, how its policy instruments work, how it expects its actions have the desired effect and what is the environment in which it operates. It must also explain to the public its limitations and what is beyond its reach. “
8. “Communication is essential to ensure the effectiveness of monetary policy, since everything depends on the effective anchoring of inflation expectations through the credibility generated by the central bank through its actions and the results obtained.”
9. “I think I am not exaggerating in saying that the granting of autonomy to our Central Institute has been one of the most successful structural reforms that has been carried out in the country during the last decades.”
10. “There could also be episodes in which it might be convenient to adopt a more restrictive monetary policy stance, even if the behavior of contemporary and expected inflation is not misaligned with the fulfillment of the objective. Exuberance in the financial markets could predict destabilization in the future, which could have severe repercussions on the behavior of economic activity and inflation. This circumstance could justify the adoption of a more restrictive monetary policy. “
Source: el financiero.com.mx
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