During normal times, one of the first reactions to growth uncertainties has been for central banks to provide monetary support. This point is illustrated by the recent SARS‑CoV‑2 outbreak to which several Asian countries were quick to respond with monetary and fiscal support. However, Mexico's central bank has taken on a tight monetary stance despite a wide output gap and high real interest rates. This week we explore why Mexico's central bank intentionally biases its monetary policy to the hawkish side despite concerns around growth.
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