agustin carstens : interview in central banking journal interview with mr agustin carstens, governor of the bank of mexico, in central banking journal, united kingdom, conducted by ms claire jones on 8 october 2010, washington dc. this article was originally published in : central banking journal, volume 21, number 2. for more information contact : claire jones, deputy editor ( cjones @ centralbanking. co. uk ) or visit : http : / / www. centralbanking. com / static / central - banking. * * * the governor of the bank of mexico tells claire jones about how the central bank is improving its capacity to safeguard financial stability. you have had several spells working at the bank of mexico. i was wondering if you could tell me about how the central bank has changed over your career. it has changed dramatically. i started in the early 1980s. then the concept of the central bank was to be a kind of black box where there was little communication with the market. we only published data on reserves three times a year, for instance. there was a view that the markets didn ’ t know how to administer the information. the central bank was also fully dependent on the government. we had virtually no independence. now it ’ s almost the opposite. we have complete autonomy. we ’ ve moved from being a very interventionist central bank, in terms of the way we conducted monetary policy, to a market - orientated monetary policy with a fully fledged flexible exchange rate regime. and a very important component of this is having a precise communications strategy. since you ’ ve taken over what has changed? going back to communications, we ’ ve tried to be clearer in expressing the motivations for our policy decisions. we ’ ve tended to keep rates on hold this year, but still we ’ ve tried to be more precise in saying why that ’ s been the case. we ’ ve also tried to express the issues that are concerning us. the market has appreciated this, judging by the feedback we ’ ve had from analysts and commentators. we ’ ve also done an internal restructuring, the most important feature of which is the creation of a department which will concentrate fully on financial stability. we ’ ve increased our resources there. can you tell me a little bit more about the new department? the department will have around 60 or 70 people and a very important part of its work will be to gather information and organise this in a way that will better enable us to see whether firms are comply

a negative output gap is observed. it is reasonable to expect that the expansion of economic activity will continue during the remainder of this year and in 2017. in fact, the anticipated upturn of industrial output in the united states, if materialized, would contribute to a more balanced economic recovery in mexico through its impact on manufacturing output and exports. in this respect, it is worth noting that there are some early signs of a revival of production in the manufacturing industry, and that this sector ’ s external sales, though still sluggish, seem to have stopped declining. on the other hand, the expansion of gdp is likely to remain below potential and downside risks persist. it is true that economic growth in mexico has been low vis - a - vis the population ’ s needs. however, the shocks which have affected the economy have to be taken into consideration for an objective assessment of its performance. in particular, it is important to take into account that the industrial sector in the united states has been in recession since early 2015, and that gdp annual growth in that country has decelerated continuously since the second quarter of that year. notwithstanding the close long - term correlation between these two aggregates and economic activity in mexico, the latter has shown resilience to this shock. the efforts of structural reform carried out in mexico in recent years are clearly an important factor behind this result. as noted previously, general inflation has shown a favorable performance. it stands at 2. 97 percent as of september of this year, thus accumulating 17 months below the 3 percent target, including 8 consecutive historical minima in 2015. the importance of these results is underlined when it is taken into consideration that since early september 2014 the peso has depreciated by some 45 percent with respect to the u. s. dollar. although depreciation of the exchange rate has had some effect on inflation, so far, the pass - through has been concentrated on the prices of merchandise, with no second round effects. general inflation is projected to increase gradually during the rest of this year towards levels slightly above 3 percent, and to fluctuate around this figure in 2017, but it should be noted that the latter is subject to some uncertainty, since the proposal to liberalize gasoline prices starting in 2017, which may affect the evolution of inflation, is still under consideration by congress. going further forward into the medium to long terms, survey - based inflation expectations remain well anchored, although still a tad above the target. while