Is Mexico now targeting the forecast?

Commenter HL directed me to this slide from a presentation by the Mexican central bank:

HL suggested that this meant the Bank of Mexico is now “targeting the forecast”.  It does sort of suggest that policy is being adopted, but it’s hard for me to be sure.  Any comments would be welcome.

Let’s recall the mistakes made by the Fed in 2008:

1. Too much weight on inflation, too little on NGDP growth.

2. Growth rate targeting rather than level targeting.

3.  Failure to target the forecast (as well as too little reliance on market forecasts.)

4.  Failure to do “whatever it takes”.

That seems like a lot, but fixing some of these problems makes the other issues much less of a problem.  Addressing problem #2 alone, or #4 alone, would have gone a long way toward making the 2007-09 recession much less “Great”.

When combined with David Beckworth’s recent post on level targeting, I’m becoming more optimistic about global trends in monetary policy.



2 Responses to “Is Mexico now targeting the forecast?”

  1. Gravatar of Gordon Gordon
    3. March 2018 at 15:01

    Mexico seems to be an example of putting too much weight on inflation rather than NGDP. After Trump took office, the value of the peso dropped and inflation soared in 2017. The Mexican central bank has raised its benchmark rate to somewhat restore the value of the peso and rein in the inflation. But the result was a drop in NGDP from Q2 to Q3.

  2. Gravatar of Benjamin Cole Benjamin Cole
    3. March 2018 at 20:01

    Well, I like the Mexican 3% inflation target, rather than 2%. Why did they chose 3%?

    I think inflation bands work better, such as 2.5% to 3.5%.

    Measuring inflation is a bit an art anyway. Housing inflation? No need for precise targets in inflation. Just keep inflation somewhere higher than 2% is probably good enough.

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