The voice of Agustín Carstens arrived on time

After President Andrés Manuel López Obrador returned to enter the grounds of the Bank of Mexico, many specialists dedicated themselves to trying to explain the reason why interest rates were rising, how this was necessary in a scenario of high inflation and how it was the best that Banxico’s Governing Board could do for now.

And all because the President found it easy to once again boycott a decision by the central bankers, just when they had just made a historic and highly visible monetary policy decision.

A negative effect cannot yet be attributed to the level of interest rates in the Mexican economic performance.

Much more damage has been caused by public policies for the mediocre growth of Mexico’s Gross Domestic Product, than the monetary stance of Banxico to try to curb inflationary pressures.

It did not seem, therefore, the right time to attack the monetary authority and less revile its members, with what they believe to be scientists. But it is that uncontrolled need of the leader to monopolize everything, even what he does not understand.

The unfortunate silence of the central bank officials could be compensated with a lucky coincidence: the presentation of the annual report of the Bank for International Settlements (BIS).

More than the positioning of the so-called bank of central banks, the words of its owner, the closeness it has with Mexico and its opportunity to fill a huge gap that exists in the communication of the Mexican central bank.

Agustín Carstens, from his relevant position in an international organization, seemed to respond in this way to the questions, without much foundation, of the President: central banks have no choice but to continue raising interest rates to mitigate inflationary risks.

And he said something else that should resonate strongly in Banxico: central banks must communicate clearly and well the final objective of bringing inflation quickly to the target.

The voice of Agustín Carstens arrived in a timely manner in the Mexican political discussion, he came to support the Mexican central bank at a very complex moment, because global and local inflationary pressures have that seasoning of an uninformed but very powerful interference by the President.

And if Carstens were to get a scrape in the morning, it’s sure to be one of a million things he shouldn’t care about.

A basic element of a successful monetary policy is its credibility, it is the way to achieve consensus among economic agents so that they endorse a common thought of stability where prices and wages do not compete, for example. But that needs strong voices that can dispel those political noises.

For now, the morning turned to another topic that surely does not have much context, but where it does have greater influence. Now President López Obrador wants the Tax Administration Service to eliminate the requirement to request proof of tax status.

López Obrador already saw those long lines of voters, of taxpayers, very upset in front of the SAT offices, and he has already decided to eliminate that complication. But, surely, he will return to the grounds of the Bank of Mexico.

The arguments of the BIS

no option

“Central banks have no choice but to continue raising interest rates to mitigate inflationary risks,” said Agustín Carstens, thus seeming to respond to the President’s baseless questions.

Credibility

A basic element of a successful monetary policy is its credibility, it is the way to achieve consensus among economic agents so that they endorse a common thought of stability where prices and wages do not compete.

Soft landing

A soft landing must be engineered after the decision by the world’s major central banks to raise interest rates, which the BIS considered quite challenging given current conditions.

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