policy response as much as possible to the primary mandates of the respective authorities. our primary mandate is inflation targeting and it will remain so. as you know, mexico wasn ’ t hit by a financial crisis in 2008 but nevertheless we felt the need to be prepared. by having a much stronger preventive attitude, we want to stop the events that really could compromise our inflation targeting objective. if we were to have a financial crisis, then the central bank might be forced to guide monetary policy by other considerations rather than inflation per se. we want to avoid that distraction by making sure the financial system remains strong. we see it as a serious attempt to fully gear monetary policy actions to inflation considerations. it ’ s difficult to say that you can avoid crises, but there is less chance if the authorities are making a coordinated attempt to stop them. as much as we can we want to keep the price stability and financial stability mandates distinct. that might not always happen but you have to at least try. what we want to avoid is a full - blown financial crisis because then you might not have the option to use monetary policy solely for controlling inflation. we have seen this at other central banks, which have used monetary instruments for financial sector issues. perhaps not in mexico, but elsewhere a lot of criticism has been directed at inflation targeting and central banks ’ focus on cpi inflation. is this criticism at all justified? right now i would say that we have to learn the lessons of recent episodes. at least from my first stock - taking of the issue, the conclusion that i ’ ve come to is that we, as central banks, have to pay close attention to what ’ s happening in financial markets. and, as much as there is compatibility between inflation fighting and maintaining a sound financial system, a central bank should act on it. when you were talking about data gathering before, what sources of data were neglected pre - crisis perhaps not just in mexico but elsewhere as well? in mexico we already have a pretty good system. we learnt our lesson in 1995 with the tequila crisis. right now mexico ’ s at the forefront of data gathering. we ’ ve taken care of the granularity of information. we have pretty much transaction - by - transaction information. however, we need to hold more information on transactions between mexican companies and their foreign counterparties. during 2008, the most severe glitch that we had – i mean it wasn ’ t systemic at all – was some exotic derivatives that the big mexican corporations contracted with

##ing with regulation. also, we need to ensure we have sufficient information to judge whether there are systemic vulnerabilities in the mexican financial system. it is a field that ’ s not very developed in central banking though many central banks are taking similar steps. you must have all the evidence at hand to do the analysis for macro and micro issues. you also need to have coordination between the authorities. in addition to information gathering, we ’ ll have more resources devoted to analysis and also have the ability to make policy recommendations. when you say policy recommendations do you mean just in terms of regulation or also in the context of monetary policy? the idea is to see the whole map and even to make policy recommendations in areas that might not be in the direct control of the central bank. it is not only the central bank that ’ s focusing on financial stability. it is also the finance ministry and the financial regulatory agencies. through a presidential decree a financial stability board has been created, on which there are representatives from the central bank, the ministry, the deposit insurance institute and the regulators. the secretariat is housed within the central bank and a lot of the work in the financial stability department will feed into the financial stability board. the idea of the department is therefore not only to deal with areas in the domain of the central bank, but also to contribute to the discussion that will occur at the level of the financial stability board, the council for stability of the financial system. what powers will that financial stability board have? more than anything, the motivation for setting it up was to have a structure through which you could have formal coordination of policy between the financial authorities. the policies that will be agreed at that level will be implemented through the authorities represented on the board. the idea is to evaluate the system as a whole and then to quell any vulnerabilities as they emerge. there are some grey areas among the authorities, but the idea behind this is that you ’ re more likely to have a coordinated, timely response rather than overreacting. does the fact that the financial stability board could in theory call for a rate hike to tackle financial imbalances not conflict with your inflation targeting framework? not really. the idea is to respect as much as possible the mandates of each authority. if there is, say, asset - price inflation and there is a threat to financial stability, then it might be possible to address the issue through regulatory aspects rather than interest rate hikes. the idea is to align the