Monetary policy Mexico

Monetary policy Mexico Bank Building which implements monetary policy the Bank of Mexico basically has to do with interest rates. The central bank’s immediate objective is to influence the level of interest rates in national currency with the ultimate goal of seeking an environment of low inflation, stable and predictable. In particular, in 2000 the Bank of Mexico decided to adopt what is known as an inflation targeting framework for the formulation of monetary policy. Currently, the Bank of Mexico permanently pursues a goal that long is that annual inflation is located at about 3 with a variability interval of / -1 . In other words, to remain between 2 and 4 . To ensure that inflation remains on a trajectory consistent with that objective of 3 , the bank has operations in the interbank market by adopting operational target interest rate target rate for overnight interest on that market.The overnight interbank market covers operations performed when commercial banks lend money among themselves to within one day. To that monetary policy is as effective as possible and that its monetary policy changes are as predictable as possible, the Bank of Mexico provides the beginning of each calendar year a default ads on the interest rate target. Currently, the Bank of Mexico to set its target interest rate 11 times a year during the months of January through November as per schedule mentioned above. Monetary policy decisions intended to pursue that inflation shows a trajectory consistent with the inflation target of 3 . Moreover, since the last quarter of 2008 the Bank of Mexico publishes its inflation forecasts for the next four quarters in order to provide more effective monetary policy.When the Fed announces its interest rate target, this acts as a signal to financial markets participants on the possible path of interest rates in the future. This leads to movements in other interest rates on short-term and changes in asset prices as the government and corporate bonds, and interest rates applicable to cr cards, self-financing, mortgage finance companies, etc. . This results in a series of events that affect the cost of household consumption, sales, investment, production, employment, wages, inflation expectations and, eventually, consumer prices. The economy is a limit to the amount of goods and services that can produce or provide a sustained manner over the long term. The Bank of Mexico is concerned that demand or aggregate expenditures are excessive or too weak in relation to the productive potential of the economy.When demand is higher than the level of sustainable production to emerge that inflation pressures start to rise. When the Fed perceives that this is happening, try to reduce the expansion of aggregate demand by increasing its operational objective for interest rate. Monetary policy is not an easy task. First, there are many variables that affect prices. Second, monetary policy operates with lags that are uncertain and variable. Thirdly, the knowledge of how monetary policy actions are transmitted to prices is imperfect. Finally, it takes time for these actions have an effect on inflation. This has the implication that the central bank has to be very cautious in his diagnosis on the present and future inflationary pressures, trying to anticipate events in order to really be able to peg the rate of price growth and expectations of inflation low, stable and predictable.The challenge for the Bank of Mexico is to consolidate price stability has worked so painfully achieved. This is the only way the Bank of Mexico can win the confidence of the public that inflation will not reappear later outbreaks.