Bank of Mexico governor nomination sparks uncertainty

Significance

AMLO initially nominated Arturo Herrera for the role in June, replacing him as finance minister with Rogelio Ramirez de la O. Incumbent Governor Alejandro Diaz de Leon will stand down at the end of December.

Impacts

• A tighter monetary policy will open a significant gap with US interest rates, helping to stabilise the peso against the US dollar.
• Given Rodriguez’s provenance, the harmonious relationship between Banxico and the finance ministry will probably continue.
• The nomination of an unexpected individual to lead the central bank will reaffirm AMLO’s authority on economic matters.
• Although the finance ministry controls exchange rate policy, the government is not likely to modify the free-floating exchange rate regime.