The intact autonomy of Banxico

For those who wonder if the autonomy of the Bank of Mexico is at risk, I dare to say emphatically that it is not. The governing board is made up of men and women of high technical capacity and professional solvency who have fully complied with the Banxico legal framework, which is intact.

The arrival of Victoria Rodríguez reinforces that body of professionals. She is an official with extensive experience in public finance issues and, therefore, familiar with investment, debt, and financial system issues. In this, as in previous administrations, the nominees come from top-level positions in the country’s economic policy decision-making, which enables them to participate in the most complex central bank policy decisions, which are taken collegially. Today is not much different than before.

From the Undersecretariat of Expenditures, the pulse of the main economic variables of the country can be taken every day. The bank also has very solid bodies for economic analysis and forecasting to support decision-making, which not only remain, but have been strengthened.

Of course, the challenges for Banco de México for the coming months are not minor. Faced with the growth in inflation rates, the board is faced with the dilemma of increasing rates to contain the price increase, but at the cost of hindering the economic recovery, in a context in which a large part of the increase in prices in It really has to do with exogenous and transitory factors, such as supply problems derived from the pandemic, inflationary pressures from the United States or the price of raw materials.

That is, an excessive increase in rates could have little effect in reducing prices and may have costs in terms of growth. The other challenge is to react, in the appropriate time and magnitude, to the increase in the rate that could occur in countries that represent important markets, which so far has practically not happened, most central banks maintain a negative interest rate .

An excessive increase in the rate may affect the Mexican economy, which, by the way, has better indicators of public finances and reserves than other emerging economies. In fact, spending control has helped reduce inflationary pressures. Another element that helps to explain the financial stability of the country in recent years is just independence, respect for collegiate processes and good decisions regarding the central bank’s monetary policy, this will be maintained and will be essential to get out of the situation well. difficult times ahead.

If the appointment of Victoria Rodríguez is consolidated, she will surely play a good role at the helm of Banxico.

Twitter: @vidallerenas

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Guest column

A graduate in Economics from the Instituto Tecnológico Autónomo de México (ITAM), he has a Master’s Degree in Public Policy and Management from the University of Essex, United Kingdom and a Ph.D. in Public Administration and Management from the University of York.

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