Ramírez Nervous

Rogelio Ramírez de la O looks into his crystal ball, and finds himself disturbed. With inflation on the rise, he thinks the United States should be raising interest rates more aggressively. Instead, the Fed is hoping that a weaker economic climate will drive down the price of oil and other basic staples, thus keeping a lid on inflation. At the same time, the cheap money will hopefully prevent a prolonged recession. 

That's a pretty fine line to walk, says the author. Ramírez de la O argues that if the strategy doesn't work, the consequences could be a recession much more severe than that of 1990 or 2001. For the first time that I can remember, he raises the specter of stagflation in Mexico. Despite Mexico's relative economic resilience, he writes that the success or failure of the US strategy will determine Mexico's fate: 

Mexico's economic destiny will continue to be inextricably linked to that of the United States. Even if the United States escapes from inflation and recession, its recovery will be slow and Mexican growth will be very limited. If in this scenario the government takes care of qualitative issues, for example, security, spending austerity, quality of education, and honesty, it will advance a great deal. If it can't even achieve visible progress in these fields, it will dangerously magnify the effects of the lack of growth. We'll see the results shortly.