Embracing uncertainty - monetary policy in Latin America

Speech by Mr Alexandre Tombini, BIS Chief Representative for the Americas at the BIS, at the Central Banking Autumn Meetings, Mexico City, 13-14 November 2024.

Uncertainty is a fact of life, especially in a region like Latin America. Luckily, policymakers in the region have substantial experience with policymaking under uncertainty, and this holds lessons for economies around the world. Economic policy uncertainty affects financial markets by increasing volatility and risk premia, and it impacts the real economy by reducing confidence, consumption and investment. This uncertainty also diminishes the effectiveness of fiscal and monetary policies.

In Latin America, the current unbalanced monetary-fiscal policy mix and uncertainties around fiscal, financial and external vulnerabilities could complicate central banks' efforts to achieve disinflation. Despite these challenges, Latin American central banks have the tools to fulfil their mandates. Past crises have strengthened the resilience of economies and institutions. Recent economic indicators show resilience, with moderating inflation and positive results from monetary policies. Central banks can manage current uncertainty through effective communication and transparency, clearly articulating their policy intentions and decision-making processes.