MEXICO CITY (Reuters) - Mexico’s president on Tuesday named former finance official and central bank board member Alejandro Diaz de Leon to take over as the head of the central bank, replacing Agustin Carstens.

Mexico's President Enrique Pena Nieto (R) shakes hands with newly appointed Central Bank Governor Alejandro Diaz de Leon at Los Pinos presidential residence in Mexico City, in this handout photograph released to Reuters by the Mexico Presidency, November 28, 2017. Mexico Presidency/Handout via REUTERS

In his first interview after being nominated to replace Carstens, Diaz de Leon said inflation may not fall as forecast because of recent and future shocks.

The following are highlights of the interview:

WHAT IS YOUR MAIN PRIORITY AS YOU TAKE THE HELM FROM CARSTENS?

-All decisions are taken by the board. Our mandate is very clear which is to have low and stable inflation. We have been facing challenging times regarding inflation.

-This year has been complicated by various shocks that have affected the Mexican economy and have been reflected in an increase in inflation. We have taken several monetary measures to induce a reduction in the base of inflation back to target. That is clearly our main challenge and the core of our mandate.

WHERE DO YOU STAND IN THE DEBATE ABOUT WHETHER MEXICO SHOULD START LOWERING RATES, OR MAY NEED MORE HIKES FIRST?

-In the last months we have been quite clear to highlight that we have been facing the shocks that I have alluded to and that we are still not free from potential additional shocks.

-I would say the board has conveyed a very clear message of prudence. By that I would like to stress that means we need to take the most recent information into account.

-We cannot assume that the disinflationary path will necessarily go as expected. Actually we have already highlighted in the last inflation report and the last monetary policy communique that the outlook for inflation has deteriorated in the last months.

-We have to take into account the most recent information regarding inflation dynamics, inflation pass through, relative monetary conditions vis-à-vis the U.S., the dynamics in the labor market, which has been getting tighter, and the overall dynamics and pressures on inflation.

-There is uncertainty. And there is uncertainty because we are facing quite uncertain times.

-I think we also need to bear in mind that we have to be data dependent.

-We need to see if the disinflationary path that we have anticipated in our report is likely to materialize or not.

-We need to react to the news events and data that we can see all the way up to the final date for the monetary policy decision.

-Because of this uncertainty around so many variables, it is very hard to precommit or provide much clearer guidance in terms of what rates would do in the future.

WILL THE BANCO DE MEXICO TAKE MEASURES TO KEEP THE PESO AROUND THE 17-18 RANGE?

-The exchange rate reflects always at least two very important or relevant things. Fundamentals in the economy and the uncertainty regarding the fundamentals in the economy.

-The floating exchange rate regime has worked very well for Mexico.

-Having said that, in every point in time, unless we have abnormal conditions in the market, the exchange rate reflects precisely this combination of fundamentals and risk premium. So it is very hard to say how much of the level of today’s exchange rate is associated with that risk premium.

-The board has stressed and I think it is important to stress that we don’t have any level or range predetermined for the exchange rate.

-We do not precommit to actions on a specific level.

WHAT IMPACT COULD WE EXPECT ON THE ECONOMY IF NAFTA TALKS FAIL?

-In our baseline scenario there is a continuation of the free trade agreement. Nonetheless, we should always be aware that potential adverse scenarios could materialize.

-The resilience of the financial system is such that it allows the economy to weather potential adverse scenarios.

-I think it is very hard to depict a very clear adverse scenario right now. In our central scenario the free trade agreement continues. And if there is a deviation from that central scenario the economy is resilient and the policies that have been put in place have made the economy more resilient.

WOULD THE BANK RAMP UP CURRENCY INTERVENTION IF NAFTA COLLAPSES?

-It is a scenario that is highly speculative today to say what would be exactly the market dynamics around that.

-What I can say is that the non-deliverable forward mechanism that we have in place and was introduced in January this year basically tries to provide liquidity in the FX market at times when the volume and liquidity dries up and the price discovery dynamics of the market do not behave up to what we believe it should.

SHOULD THE CENTRAL BANK TAKE GROWTH INTO ACCOUNT AS IT AIMS FOR ITS INFLATION TARGET?

-Our mandate is very clear. We have a single mandate. The mandate is to keep inflation low and stable. We believe that by achieving that mandate we have a very important contribution in fostering growth.

-Price stability is not an end in itself. But it is a crucial instrument to achieve the ultimate goal which is stability and the adequate conditions that could foster growth.

-But we have very clearly a single mandate and we believe that the best way of attaining that is with this policy that has an efficient convergence towards our target.

DID YOU BECOME MORE DOVISH AFTER YOUR TIME AT THE FINANCE MINISTRY?

-I think it is always a bad idea to talk in first person, or talk about yourself. But what I can say is that probably any central bank would like to have the wisdom of an owl, rather than the other two extremes.