MEXICO CITY, July 13 (Reuters) – Never mind inflation at more than an eight-year high. Banco de Mexico Governor Agustin Carstens is proud of his accomplishments at the helm of the central bank as he prepares to step down.
In an interview with Reuters on Thursday, Carstens, a former finance minister with blue-chip academic credentials, described himself as the latest in a line of governors bolstering the autonomy of Mexico’s central bank.
The 59-year-old Carstens, who is highly respected on Wall Street, will leave in December to take the top job at the Bank for International Settlements (BIS). He said he was cutting short a tenure meant to have lasted through 2021 because opportunities such as the one at BIS only come up occasionally.
After he took over in 2010, Banco de Mexico began publishing minutes of monthly monetary policy meetings, and Carstens increased the quality and flow of data and analysis about Latin America’s No. 2 economy.
“That has brought Banco de Mexico to be one of the strongest central banks, needless to say among emerging markets, but also in general, considering advanced economies’ central banks,” Carstens said.
Carstens’ much-praised governorship is ending with a bumpy ride. On his watch, annualized inflation surged to 6.31 percent in June, way past the central bank’s 3 percent target and the highest level since December 2008.
Largely to blame was a slump in the peso currency following U.S. President Donald Trump’s surprise election in November and a surge in gasoline prices after President Enrique Pena Nieto this year began to remove government subsidies.
Carstens said he was disappointed to be leaving the job with inflation high.
“Of course I would have loved to have it on the record in my period that we had consolidated strongly the 3 percent objective,” said Carstens, who has headed the central bank for eight years.
However, he said the liberalization of fuel prices would be positive for the economy in the long run.
“If you take it way, because it is not a generalized increase in prices, we are not that far way from our target,” he said.
The peso currency weakened more than 1 percent against the dollar last Dec. 1 when Carstens’ plan to leave the bank was announced, surprising investors and raising concerns about who might replace him. It slumped further, to record lows, after Trump took office, but has since recovered.
In an effort to beat back prices, Carstens and the bank’s other board members have hiked interest rates for seven straight monetary policy meetings. The benchmark rate now stands at 7.00 percent, the highest level since 2009.
Carstens said criticism of current inflation rates shows just how much the central bank has improved in recent decades from the mid 1990s when inflation hit nearly 52 percent.
“When the Banco de Mexico became independent more than 20 years ago, (current levels) of inflation were considered acceptable, even extremely good. Today, Mexican society considers 6.3 percent inflation as excessive and undesirable, and it should be that way,” he said.
Carstens, who earned a doctorate in economics in 1985 from the University of Chicago, served two stints at the International Monetary Fund, including as deputy managing director, and unsuccessfully sought the job of IMF head in 2011, losing out to France’s Christine Lagarde.
Peña Nieto has not announced who will replace him.