The winding down of the U.S. Federal Reserve’s asset purchasing program is generally viewed as negative for Mexico and other emerging markets.
Yet, if managed properly, the “taper” of the program could be positive for these markets, according to Agustin Carstens, Governor of the Bank of Mexico.
“If tapering leads to a more normal situation I think that that will be good for the markets and for Mexico,” Carstens, who was runner-up to Christine Lagarde when she was appointed managing director of the International Monetary Fund (IMF), said.
“Tapering is not tightening. It’s a less aggressive monetary policy.”
e added that communication by the Fed’s Open Markets Committee, which initiated forward guidance under Ben Bernanke, was key.
When speculation that tapering would be announced this autumn by the Fed began, capital flooded out of emerging markets including Mexico. The Mexican peso has weakened and its bond yields have risen when economic data has indicated the Fed may start the tapering process soon.