and since 2003 the permanent target has been 3 percent annual inflation. this commitment refers to headline inflation as measured by the national consumer price index ( inpc ). a variability range of plus / minus one percentage point around this benchmark was added later, an addition which should not be interpreted as a target but as an acknowledgment of uncertainty stemming from the highly volatile nature of some components of the price index. in 2008 the bank of mexico formally replaced its policy instrument, moving from a quantitative guideline ( the “ corto ” ) to the overnight interest rate used in the interbank market. in the middle of that year, to counter pressures from currency depreciation and other supply bis central bankers ’ speeches shocks which had pushed inflation off the convergence path to its permanent target, the bank of mexico raised its reference interest rate by 75 basis points. 3 however, in 2009 when it was clear that those pressures had ceased to threaten price stability, the bank of mexico relaxed its monetary policy. specifically, from january to july of that year the overnight policy interest rate was cut 375 basis points in all, and since then the reference policy rate has been kept at 4. 5 percent. the resulting expansionary monetary stance, as reflected in the central bank ’ s monetary conditions index, among other indicators, has helped to mitigate the impact of the global trade and output contraction that led to the severe recession in 2009. 4 monetary policy was effective at bringing inflation back to the desired convergence path. annual inflation fell from 6. 5 percent in 2008 to 3. 6 percent in 2009 and since then its average has been 3. 9 percent. furthermore, after hitting 3 percent in march of 2011, annual inflation has remained substantially close to, albeit somewhat above, the permanent target. the fact that inflation has approximated the objective during the last four months is a hopeful sign, since a similar pattern had not been achieved since 2006. this progress should be beneficial to expectations for the sustained feasibility of the inflation target in a context of economic growth. in order to take full advantage of the current benign environment, monetary policy must continue to be geared toward facilitating the anchoring of inflation expectations on the permanent target. a challenge to this goal is the fact that medium - and long - term inflation expectations, as reflected in analyst surveys and the bond markets, still remain above 3 percent, and in the recent past, short - term expectations frequently surpassed this level by a large margin. monetary policy should also take into

alejandro diaz de leon : climate change and its impact on the financial system remarks by mr alejandro diaz de leon, governor of bank of mexico, at the conference on climate change and its impact on the financial system, mexico city, 5 december 2019. * * * good evening everyone. on behalf of banco de mexico, i am pleased to welcome the participants of the conference on climate change and its impact on the financial system. it is a great pleasure for banco de mexico to collaborate jointly with cemla, the center for latin american monetary studies, the ngfs, network for greening the financial system, and the university of zurich in organizing this meeting. the sessions that comprise the conference cover some of the main topics in climate change and its economic and financial impact. climate change and environmental degradation constitutes a challenge at national and global levels and is a source of financial risk. climate change is presenting challenges related with extreme weather events, rising sea levels, declining productivity of agriculture and fisheries, trade and supply chain disruptions, the degrading of ecosystems, reduced welfare of communities due to air and water pollution, and even mass migrations in the territories most adversely affected. in some emerging and low - income economies, poverty, an inadequate institutional framework and a weak rule of law has created a fertile ground for a predatory behavior that has significantly degraded the environment, in some cases irreversibly, deteriorating both the welfare and development opportunities of the population affected. call for global action the growing recognition of climate change consequences is influencing the core tasks of central banks. for banco de mexico, the sound development of the financial system, one of our key objectives, requires from the central bank, not only to foster financial stability and better services for the benefit of households and corporates, but also to eradicate financing and risk management practices that avoid recognition of environmental and social negative externalities and risks. globally, the voices behind this call for action are expanding rapidly. multilateral organizations are focusing increasingly their portfolios on green and sustainable activities and several central banks are in favor of decisive action. ngfs, the network for greening the financial system, was originally set up by 8 central banks and now has 51 central banks and financial supervisors together with 12 observers. the fact that this technical expert group was just created two years ago, highlights the global commitment to address climate related risks in the financial sector. the ngfs supports an orderly transition towards a low pollution and low carbon economy by promoting best practices, improving data availability