Speech

Opening Remarks at 2021 Michel Camdessus Central Banking Lecture

July 28, 2021

Ladies and Gentlemen, dear colleagues and friends: welcome to the eighth Michel Camdessus Lecture—our signature lecture series on the role of central banks.

It is my privilege to welcome and introduce our speaker today, the Governor of the Bank of Mexico, Alejandro Díaz de León.

He is coming to address us in the midst of a global recovery. And yet, while in some countries the rebound is strong, fault lines are widening between economies. The six percent growth that we are projecting for the world this year is the same figure we projected in April. But between April and July, the composition of this six percent has changed.

Now, some economies are projected to grow faster, and I’m pleased to tell you this includes Mexico where we are predicting growth of 6.3 percent this year and 4.2 percent next year—an upgrade of more than 1 percent in both cases, thanks to progress on vaccines and positive spillovers from the strong US recovery. But many emerging and developing economies are projected to grow slower than we had anticipated. This difference is primarily due to dramatic differences in vaccine availability—thus, infection rates—and availability of fiscal space to act.

Navigating our way out of this dangerous situation requires careful choices by policy makers, including by central bankers. And they have stepped up, responding swiftly to address the financial market turmoil at the onset of the pandemic, then dealing with an economy put in a standstill. This required nimble crisis management, massive policy stimulus, and handling complex operational challenges to keep financial systems functioning smoothly. So, what lessons did central banks learn from this crisis?

Similarly, getting out of the pandemic will be challenging for central banks. How will they calibrate the withdrawal of stimulus when models and data are not applicable and uncertainty remains extreme, when the extent of scarring is still unknown, and markets willingness to finance high public and corporate debt levels could change rapidly? What should be their guiding principles to navigate our exit?

And finally, what will the post pandemic landscape look like? How will central banks adapt their tools, and deal with changes in preferences for digital money that are accelerated by the pandemic? What will be the biggest challenges for central banks in the future?

These are just some of the difficult questions being faced by central bankers everywhere. And I cannot be happier that, in search for answers, we can tap into the immense expertise of Alejandro Díaz de León, who has helped further strengthen the Bank of Mexico's position as one of the most respected and agile central banks.

Alejandro has had a most distinguished career in public service. Back in 1991, he started out at the Bank of Mexico, where he held various positions, including Director of Macroeconomic Analysis, and Director of Economic Studies. He worked closely with Agustín Carstens, who would later serve as Deputy Managing Director of the IMF and overlapped with another young and promising Alejandro—Alejandro Werner, who came to the Fund as Director of our Western Hemisphere Department. These personal connections highlight the close and continuous relationship between our institutions.

Alejandro also demonstrated remarkable versatility. In 2007, he became general director of the National Pension Fund of State Workers, followed by a stint as the Head of the Debt Management Office at Mexico's Ministry of Finance. Subsequently, he headed Mexico's Export-Import Bank until 2017, when he returned to the Bank of Mexico and took the helm in 2018.

Alejandro has shown outstanding leadership. He impressed his peers by navigating a range of difficult challenges: high inflation at the start of his term, which he successfully reduced; and, of course, the pandemic, where the central bank played a key role in the crisis response through a well calibrated loosening of monetary policy, and through clear communications and strengthened transparency, including by the publication of inflation reports.

Given his many accomplishments, little wonder that Central Banking Journal recently named him Central Banker of the Year in 2021.

Alejandro, I am deeply honored that you have accepted our invitation to deliver the Michel Camdessus Lecture. We all look forward to hearing your thoughts.

Thank you, and the floor is yours.