of the national consumer price index. focused on its constitutionally mandated primary objective of price stability, the bank of mexico has set its policy interest rate taking into account, among other factors, how the cyclical phase of the economy may affect future inflation. hence, in the midst of the big contraction of 2009, the central bank lowered its policy interest rate from 8. 25 to 4. 50 percent, and in 2013 it has further reduced it to 3. 75 percent. in the last ten years, annual inflation has remained much lower than historical levels. this has been possible thanks to the support of a prudent fiscal stance, a prerequisite for the credibility of monetary policy in any country and, hence, something which should continue to be safeguarded in the future. in 2013, after a spike resulting from agricultural price shocks, annual inflation has recently fallen, reaching 3. 4 percent in september. as in previous years, medium - and long - term inflation expectations have remained relatively stable, though above the permanent target. in the future, several risks need to be assessed for maintaining inflation under control, including possible pressures from renewed financial volatility and new shocks from non - core price components. in any case, the governing board of the bank of mexico has repeatedly see, for example, oecd ( 2010 ), pisa 2009 at a glance, oecd publishing. bis central bankers ’ speeches stated that it will continue to be vigilant, acting in a timely way if shocks to relative prices could potentially contaminate inflation expectations and put convergence to the permanent inflation target at risk. concluding remarks to conclude, after a year of economic slowing, the 2013 third quarter has seen encouraging signs of improvement. the outlook for the mexican economy includes a recovery next year, although downside risks prevail, including an adverse external scenario and protracted difficulties for construction - sector restructuring. although domestic financial markets have operated in an orderly way in the face of changing international sentiment toward emerging economies, further bouts of volatility may pose some challenges to both inflation control and the strengthening of a recovery in the short term. finally, mexico ’ s current momentum in structural reform is highly promising, as both the changes approved and those under discussion seek to enhance productivity growth, a key element for underpinning greater long - term economic expansion. bis central bankers ’ speeches

the system and institutions more resilient. however, their use is hardly a guarantee of precluding future financial crises. in designing macroprudential tools, rules are preferable to discretion, as they can be more easily formulated to generate the right incentives for making the financial system more stable. it is key to remain on the alert for possible unintended consequences in the form of distortions and inefficient resource allocation, and long - term risks of factors that may inhibit the development of the system. until now, the prudential policies implemented in mexico have worked well, but we need to continue strengthening financial regulation and the macroeconomic framework so that incentives lead to a deeper, more efficient, and stable financial system. see bank for international settlements ( 2013 ), triennial central bank survey of foreign exchange and derivatives market activity in 2013, april. bis central bankers ’ speeches