the difficulties implementing those measures, and the short - term tension between fiscal consolidation programs and economic growth. consequently, uncertainty continues to prevail in the eurozone, a situation which over the last two years has contributed substantially to the volatility of international financial markets. obviously, instability has affected mexican asset prices and, in particular, the value of the mexican peso versus the u. s. dollar. the peso market is highly liquid and the floating exchange - rate regime in place since 1995 has functioned as a “ shock absorber ” for the economy. the complexity of the problems in the euro area likely means that it will be some time before sufficient solutions are finally implemented. hence, it is reasonable to expect that the eurozone may continue to fuel recurrent episodes of heightened risk aversion with global financial repercussions. also, the euro area will continue to be a drag on the global economic recovery. as the possibility of the occurrence of a tail - event in that area has not sufficiently diminished, additional deterioration of global economic prospects cannot be ruled out. this in turn could further constrain mexico ’ s economic recovery. two comments on external implications for mexico are in order. first, it is possible that some of the wider variability posted by the mexican peso relative to other emerging - market currencies during recent months reflected fears of contagion from europe through banking channels, given that the two largest spanish banks hold a significant share of assets in the mexican financial system. although caution is always a good strategy for economic policy, sound regulation and the positive performance of foreign bank affiliates give pause to these concerns. foreign banks can only operate in mexico as subsidiaries, and hence they have to comply with the same regulatory requirements as domestic banks, including limits for related - party lending and high capitalization standards. additionally, while many financial institutions in advanced economies are deleveraging, and given the under - banked nature of the mexican economy, both foreign and domestic banks in mexico have continued to expand their infrastructures as well as their lending to the private sector. second, the increasing monetary accommodation adopted by the u. s. federal reserve and other central banks in advanced nations since the global financial crisis may have contributed to the international search for yield that has caused substantial capital inflows to emerging - market economies. in particular, considerable flows have been directed to pesodenominated mexican government bonds during the last two years, allowing downward shifts of the domestic yield curve in tandem

a likely negative impact on inflation. also, upward pressures on key agricultural prices are probable in the following months due to weather and a chicken pandemic. an additional element has been a rise of short - term inflation expectations as reflected in analysts ’ surveys. moreover, inflation expectations for all time horizons remain above the 3 percent target. this is significant as inflation expectations have never been anchored on the objective, making the task of convergence challenging. therefore, monetary policy should be vigilant and actions should be timely in order to prevent supply - price and exchange - rate shocks as well as other factors from contaminating the behavior of other prices and pushing up inflation expectations away from the permanent target. convergence to price stability is a necessary condition for financial stability and longterm economic growth. concluding remarks to conclude, sustained higher long - term economic growth in mexico requires consolidated foundations for financial stability. in addition to convergence to price stability, the basic policy agenda includes the strengthening of public finances, especially given significant dependence on oil revenues and the fact that the price of oil in recent years has been unusually high but might not prevail in the future. the agenda also encompasses the deepening of macro - prudential regulation and improved supervision of the mexican financial system. finally, a wide set of possible structural reforms should be considered, including the dismantling of obstacles to private investment and further deregulation of the economy in order to enhance total factor productivity and, hence, promote higher living standards. bis central bankers ’ speeches