of the previous year, and the lower rate of growth of core prices. nevertheless, the decline in inflation did not match expectations prevailing only a few weeks ago, due to the behavior of non - core prices, since the core component in fact undershoot previous projections. in this context, inflation expectations for the end of 2018 have increased, to levels slightly above the upper end of the variability interval around the 3 percent target. on the other hand, monetary policy has succeeded in avoiding second - round effects from the recent shocks, as suggested by the fact that long - term inflation expectations have remained relatively stable. while this is a laudable outcome, it is also important to take into consideration that we cannot be satisfied yet, since long - term inflation expectations based on surveys remain at around 3. 5 percent, i. e. above the target, and the differential between nominal and real yields on government securities continue to point to upward risks for inflation in the medium and long terms. it is difficult to define a baseline scenario for the behavior of inflation in coming months, in a context of unusually high uncertainty as the one prevailing today. however, in view of the recent behavior and the prospects for inflation, even assuming an orderly behavior of the exchange rate, no demand pressures on prices, and the absence of new supply shocks, a convergence of inflation to the 3 percent target by the end of this year appears to be unrealistic. in fact, under these assumptions, it is estimated that the target would be achieved during the first quarter of 2019. in my opinion, the balance of risks for this scenario is clearly tilted to the upside. as i noted above, given the current cyclical position of the economy and the balance of risks for coming months, the emergence of demand pressures on prices does not seem to be the main source of concern. non - core inflation should decline, but it is also true that its components tend to be highly volatile and therefore its behavior is subject to a high degree of uncertainty. in any case, i am of the view that the main risks for inflation, especially during the first semester of the year, are related to the possibility of wide fluctuations of the exchange rate. for the reasons noted above, the potential for pressures on the peso related to the renegotiation of nafta seems to have declined, at least in the short term. at the same time, those deriving from the normalization of monetary policy in the united states have exacerbated,

of up to usd 20 billion, which in fact does not imply the use of international reserves. the latter has contributed to the significant appreciation shown by the peso in recent weeks. it is important to note that this approach is fully consistent with a flexible exchange rate regime that plays a key role as a shock absorber, which operates under the premise that the level of the equilibrium real rate must be determined by market forces, and where the value of the domestic currency is supported mainly by economic fundamentals. against the background of an increase in public debt as a share of gdp, a major fiscal adjustment has been announced for 2017 and subsequent years. indeed, the strict implementation of these measures should allow integrated by representatives of the banco de mexico and the secretaria de hacienda y credito publico. more flexibility in the conduct of monetary policy and, therefore, a more efficient economic adjustment to an adverse external environment. the role of monetary policy in preserving or restoring financial stability is a subject of much debate. macroeconomic stability is a necessary although insufficient condition for financial stability, and of course monetary policy is a key element in this regard. but the role of monetary policy beyond this is not always clear. in my opinion, although there may be instances where monetary policy actions can be usefully steered towards financial stability, frequently its effects on the broader economy beyond the financial sector will make it a blunt and inefficient tool. for this reason, it will often be better to rely on the implementation, with the involvement of all the corresponding authorities, of macroprudential policy measures specifically tailored to fend off risks to the stability of the financial system, and which in general do not have consequences beyond their intended purpose. it should be noted, on the other hand, that financial stability is a complex objective that will many times require coordinated actions in several fronts, including, in addition to macroprudential instruments, fiscal, monetary and microprudential policy tools. the financial system stability council ( cesf ), created in mexico in mid - 2010, and which encompasses all the authorities in charge of macroeconomic policy, and financial regulation and supervision, represents an effort in this direction naturally, the pernicious implications of volatile international capital flows on macroeconomic and financial stability are hard to avoid. in this context, the possible implementation of measures to “ manage ” the flows of capital to and from an economy has been gaining adherents. however, the distortions introduced by capital controls are likely to