The central bank of Mexico has issued warnings regarding any U.S. policy that will change the trade relationship between the two countries. The bank believes the production chains are currently vulnerable, and that Trump’s policies could not only affect its exports, but also restrict the inflow of foreign direct investment. The governor of the central bank Agustin Carstens, made a presentation to opposition lawmakers regarding key concerns for monetary policy makers. He also warned that the liberalisation of fuel prices will have some undesirable consequences, though they may be short-lived. He asserted that the aggregate demand is unlikely to cause inflationary pressure, and he expects the inflation rate to reach the central bank’s goal for 2018.
Mexico’s central bank has been busy in recent months, trying to prop up the peso against the dollar. At the start of the year, the bank sold $1 billion in Mexico and New York to uphold the peso, after a nosedive to record lows, following increasing fears over Donald Trump’s protectionist policies. The forty-fifth president of the United States had said during his campaign that he would erect a wall across the southern border of the US. He also said he would deport illegal immigrants, increase tariffs on certain exports from Mexico (and other countries) and also review the North American Free Trade Agreement.