the euro area and canada among them, that has also aroused concern about the possibility of a faster normalization of monetary policy in these countries. secondly, and closely linked to the above, the risk of sharp valuation adjustments in some financial assets, particularly among the high - risk segment, has increased. in fact, mostly as a result of the above - noted anxiety with the speed of normalization of monetary policy in advanced economies, and the possible overvaluation of some of those assets, barely a month and a half into 2018 we have already seen a significant increase in the yields of longterm bonds in many advanced economies and sharp downward corrections in their stock exchanges. obviously, bearing in mind the magnitude of the potential market disruption, the possibility of disorderly adjustments in the future with adverse effects on global economic activity and financial stability cannot be discarded. thirdly, the functioning of world markets can also be affected by a number of other factors, including problems of a geopolitical nature and / or the proliferation of protectionist trends. for instance, notwithstanding progress on negotiations between the united kingdom and the european union, uncertainty regarding the possible final outcome has not dissipated. in addition, the potential for problems in other countries or regions, such as north korea or the middle east, lingers. and one must add to this the possibility of further actions aimed at obstructing trade flows, particularly in the united states. in a context of strong risk appetite and a generally favorable economic outlook, emerging economies have continued to attract substantial capital flows. however, the materialization of the previously noted risks or others, such as more serious economic difficulties in china, would tighten external financial conditions for these economies and impact their asset prices, with more acute effects on those countries beset with more evident vulnerabilities. naturally, the recent evolution of the mexican economy has been heavily influenced by the peculiarities of the external environment. in fact, as will be noted below, external factors have impinged on economic activity in divergent ways, while simultaneously being a source of anxiety for domestic financial markets. economic activity in mexico showed wide fluctuations in the second half of 2017, as a result of the natural disasters that took place in the third quarter of the year. thus, after a decline during the period july - september, gdp growth recorded a strong rebound in the following quarter, in response to the efforts of reconstruction and the recovery of oil output, which had been affected temporarily by the september earthquakes and other meteorological phenomena.

previously mentioned risks may imply postponement of this objective for later in the year. the increase in the monetary policy interest rate in early february was essential to move in this direction. at the same time, this adjustment should protect the mexican economy from the risks derived from the expected increase in the federal funds rate in the united states in march of this year, since if similar adjustments finally take place in both countries, the differential between policy rates would remain constant. irrespective of the above, the need for an additional change in the monetary policy stance in mexico within that time frame, would need to be assessed on the basis of incoming information on inflation and its prospects. i am also of the view that in the face of major risks ahead, the possibility of additional upward movements of the monetary policy rate in mexico in subsequent months persists. mostly for the reasons already explained, 2018 will probably be a challenging year for the mexican economy. i wish to conclude by stressing that while the implementation of monetary policy is a fundamental piece in overcoming these challenges, this is only one component of a set of policy tools available to face them. in this respect, it is important to note the following : the fiscal adjustment carried out over the last couple of years has allowed to record a primary surplus and to revert the upward trend of public debt as a share of gdp ; the flexible exchange rate has worked efficiently as a shock absorber, with the support of a mechanism for the hedging of foreign exchange risks focused on dealing with difficulties of a temporary nature ; international reserves can be considered as adequate under international standards, and a flexible credit line with the imf is available in case of need ; the financial sector is well capitalized, profitable and liquid, with no evident risks of a systemic nature observed ; and the ambitious efforts of structural reform set in motion a few years ago are already showing concrete results. on the other hand, it is also true that, if we look beyond the challenges that we may be facing in the short term, we cannot be satisfied with the results achieved up to date. indeed, much remains to be done. to this end, it will be essential to continue and build on the policies carried out so far, and to tackle those areas where progress is still insufficient.