By Karen Schwartz
Central bank scorecard: Steady hand
Latin America’s central banks have had a tough year navigating volatility amid slowing growth, falling currencies and capital outflows. Over the past year, Mexico stands out for its handling of the challenges
Central banks in Latin America have not had it easy over the
past twelve months. For the first half of that period,
authorities took action against rampant capital inflows,
sharply appreciating currencies and, in some cases, overheating
US Federal Reserve chairman Ben Bernanke ended that when he
hinted in May that the central bank might roll back its bond
buying program before year-end. This triggered a dramatic
sell-off in global emerging markets.
For policymakers, the risk framework was suddenly flipped.
Latin currencies weakened sharply. This coincided with weaker
growth in China, which was already weighing on commodity prices
and GDP projections, especially for Latin
America’s natural resource exporters.
Yet, broadly, Latin America’s central banks had
ample room for maneuver, having managed the post-crisis
recovery for the most part with aplomb. Adapting was perhaps
easier for many of the region’s better performers,
thanks to years of sound...
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