This was precisely the case during the pandemic, as we faced an unprecedented aggregate demand and supply-related contraction, together with a financial shock. Thus, policy making in emerging markets faced acute tradeoffs with limited space. In Mexico we experienced a significant foreign exchange adjustment and a record contraction of non-residents’ holdings of government securities.
Also, in spite of a sharp economic contraction, since June 2020 inflation has remained clearly above target. The economic recovery will be heterogeneous, as a result of differentiated advances in the vaccination process and in policy support across countries.