ben s bernanke : celebrating 20 years of the bank of mexico ’ s independence remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the “ central bank independence – progress and challenges ”, a conference sponsored by the bank of mexico, mexico city, ( via prerecorded video ), 14 october 2013. * * * it is a pleasure to offer a few remarks at this conference marking the 20th anniversary of the bank of mexico ’ s independence. in august 1993, mexico ’ s congress approved changes to the country ’ s constitution that granted policy autonomy to the bank of mexico and made price stability its primary mandate. over the past two decades, these actions, along with a number of other constructive steps taken by mexican policymakers, have paid substantial dividends in terms of improved economic performance. at the time that the mexican congress changed the status and mandate of the central bank, the nation ’ s economy had been suffering periodic bouts of economic instability for many years. the 1970s through the mid - 1990s in particular were marked by episodes of high inflation, boom - and - bust cycles, and financial crises. indeed, shortly after the new bank of mexico law went into effect in april 1994, the mexican economy entered the throes of the socalled peso crisis. however, the changes to the monetary policy framework, along with greater fiscal discipline and the adoption of a more flexible exchange rate, soon bore fruit. notably, inflation fell to single - digit levels by the early 2000s. and in 2001 the bank of mexico formally adopted an inflation - targeting regime, which – outside of some temporary fluctuations – has succeeded in keeping inflation at around 4 percent. importantly, the improved monetary policy framework, together with other reforms, has thus far helped reduce mexico ’ s susceptibility to financial crises. when the recent financial crisis in the united states and other advanced economies threatened to spill over to mexico, the inflation credibility enjoyed by the bank of mexico allowed it to counter economic weakness by easing monetary conditions, even though headline inflation was running above its target range at the time. the bank ’ s rate cuts helped stabilize the economy, and mexican output returned to its pre - crisis level by late 2010. strong countercyclical policy actions of this type were unlikely to have been feasible in mexico a few decades ago ; with little in the way of inflation - fighting credibility and an immature financial sector, the monetary authority in earlier years was often forced

this component of business costs, would result in a subsequent increase in headline inflation. however, this risk is more evident in emerging countries than in developed ones, where the weight of food products in cpi is lower. in latin america, inflation will remain the dominant theme and the risks on this front will remain skewed to the upside. in argentina the monetary and financial regime has faced the most significant challenge since the crisis of 2001 - 2002, but when we look at the results it is clear that we definitely managed to rise to it. for the first time in decades regardless of external and domestic disruptions, as the ones seen in the last days, the central bank is providing monetary and financial stability, two essential public goods for sustainable development. we know that the country has a long history of macroeconomic instability. monetary regimes have unsuccessfully shifted from one extreme to the other. therefore, in an economy with precedents such as confiscation of deposits ( 1989, 2001 ), hyperinflation ( 1989, 1990 ), megadevaluations ( 1989, 1990, 1991, 2002 ), and a default on the public debt ( 2001 ), the monetary system cannot set itself an exclusive goal, ignoring the economy ’ s idiosyncrasy and vulnerabilities. to achieve long - term monetary and financial stability, this historical evolution needs to be taken into account. hence, the central bank must have an “ across the cycle ” view rather than a short - term one. our country is still going through a transition phase typical of post - crisis periods. and these transition stages – where key macroeconomic variables converge to their long - term values – take time and raise enormous challenges. the chilean case shows that it takes time to become a normal country. unlike the cases of brazil, mexico or southeast asia, the abandonment of the convertibility regime included simultaneously an institutional breakdown, a huge devaluation, the destruction of the financial system and the default on the public debt. there are several examples of the normalization phase that is still taking place : monetary transmission channels are just being rebuilt, since credit to the private sector accounts for only 12 percent of the economy ; far below the latin american average. the experience of other emerging economies shows that consistency and gradualism in both policy design and implementation are the adequate approach during this phase. therefore, patiently rebuilding the power of monetary policy is a key step towards stability. it is then clear that the argentine economy is simply at a different