José De Gregorio: The Monetary Policy Report and the Financial Stability
Report
Presentation by Mr José De Gregorio, Governor of the Central Bank of Chile, before the
Finance Commission of the Honorable Senate of the Republic, Santiago de Chile, 20 June
2011.
* * *
The Monetary Policy Report of June 2011 and the Financial Stability Report of the first half of 2011 are available
at http://www.bcentral.cl.
Introduction
Mr. President of the Finance Committee of the Senate, Senator Eduardo Frei, senators.
I am grateful for the invitation of this Committee to the Board of the Central Bank of Chile to
share our views on the recent macroeconomic and financial developments, their prospects
and implications for monetary and financial policy making. These are contained in detail in
the Monetary Policy Report (IPoM) of June 2011 and in the Financial Stability Report (IEF) of
the first half of 2011.
The March IPoM stated that our economy was facing important challenges. In particular, it
configured a scenario where inflation could post significant increases in the following months.
We then said that the duty of monetary policy was to withdraw the monetary stimulus in a
timely manner, in order to ensure that the inflationary pressures we were seeing and,
especially, the risks we faced, would not alter the convergence of inflation to the
threepercent target.
Consistently, the Board acted preventively and raised the monetary policy interest rate
(MPR) by 150 basis points between March and May this year, taking it above levels forecast
by the market. This action was taken within a scenario where some of the risks foreseen in
March had materialized, and others had dissipated. In particular, as I will review shortly,
output grew above expectations during the first quarter, so we are revising upward its annual
expansion rate from our March estimate. In contrast, commodity prices have shown a more
benign behavior in external markets, as they ceased to increase and posted some declines
in the margin for oil prices and some food items.
In our June meeting (last week), we slowed the pace of MPR increases, taking it to
5.25 percent. In addition, we said that, in the most likely scenario, further increases in the
MPR would be necessary, the timing of which would depend on the incoming information and
its implications.
Changes in monetary policy operate with lags on output and inflation. In the baseline
scenario, which I will be presenting in a few moments, the full transmission of the monetary
stimulus withdrawal will help in moderating the current economic dynamism and stabilize it
near the growth rate trend, contributing at the same time to help inflation stand at three
percent over the projection horizon. But the risks are still there.
So let me describe the factors that shape our baseline scenario and the risks that might
affect it.
Macroeconomic scenario
Headline inflation is still around three percent annually, while core measures, although on an
upward trend, continue to be contained, both below March's forecasts (figure 1). The most
outstanding development of the past several months has been the attenuation of some of the
inflationary risks then identified. International commodity prices ceased to increase and the
propagation of specific price shocks has been limited. This and monetary policy decisions
have collaborated to ease fears of a further inflationary acceleration that we felt in March.
Accordingly, private inflation expectations show a decline in the last two months, although
some remain above the target (figure 2).
First-quarter data showed a fast expansion of domestic output and demand, exceeding
March's expectations. Partial indicators for the second quarter reflect an economy that
continues to grow strongly but shows some recent moderation. Worth noting is the strong
dynamism of private consumption and, to a lesser extent, the machinery and equipment
component of investment. Consumption evolves in line with fundamentals, particularly the
increase in household income, given that both employment and wages continue on the rise.
Financial conditions are still favorable.
The baseline scenario assumes that GDP will grow this year between 6 percent and
7 percent. This range is higher than foreseen in March, consistently with the upward bias
then identified. This higher growth forecast is based on actual first-quarter figures that
exceeded estimates. For the rest of the year, the pace of expansion of demand will moderate
as forecast in March. In particular, the speed of growth in the GDP of sectors other than
natural resources will quickly approach the trend rate, which is still estimated at five percent.
This scenario assumes that, on average, output gaps will remain closed throughout the
projection horizon.
On the demand side, the stronger growth during the first quarter obeyed primarily to the
acceleration of private consumption. The baseline scenario assumes that in 2011 this
expenditure component will grow more than forecast in March, although with a slowdown in
durable consumption. This latter component has shown some early signs of moderating, as
can be inferred from the behavior of car sales, among other factors. Overall, the expected
expansion of consumption will have a significant incidence on domestic demand growth,
which will increase 8.5 percent in the year. Gross fixed capital formation will reduce its
incidence on GDP growth, but will continue rising at double-digit annual rates, so investment
- at 2003 prices - will be somewhat less than 30 percent of GDP. Volume exports of goods
and services will increase around 7 percent this year, with the non-mining component
increasing more. In the case of the public sector, the baseline scenario assumes that the
structural deficit will converge to one percent of GDP towards the end of the present
Administration, as has been announced by the respective authority (table 1).
Global conditions, particularly the terms of trade, our trading partners' growth and external
financing, are still favorable to Chile, but some negative risks have intensified. At the same
time, the dichotomy between developed and emerging economies has widened in terms of
growth prospects and interest rates. In addition, inflation figures have increased further in
several countries, but, the same as in Chile, the widespread concerns we saw early this year
over the future of the inflation scenario have eased.
In the external scenario, unlike previous Monetary Policy Reports, this time projections match
market consensus, because the latter were revised downward. On aggregate, world growth
forecasts for the next two years are unchanged from March. However, there are significant
changes in its breakdown. World GDP will grow slightly more than 4% in the two-year period
2011-2012, with a milder expansion of the United States and Japan, which will be offset by
somewhat faster growth in emerging economies (table 2).
Perceived weakness in the developed world has affected commodity prices, which stopped
increasing as fast as they had since mid 2010, and there have been some revisions in the
margin. They are still in record highs, however, mainly obeying to strong demand in
emerging economies and some supply-side problems (figure 3). The WTI oil barrel hit a high
of US$114 in late April, then it fell, and at the closing of this Report it is somewhat below
US$100. Food prices, according to the FAO aggregate index, peaked in February, and have
fluctuated around that level since. The baseline scenario assumes that commodity prices will
remain fairly constant over the next two years.
The interest rate differential between developed and emerging economies has continued to
widen at all maturities (figure 4). The dollar has depreciated further and emerging currencies
have appreciated accordingly. The peso/dollar parity has not escaped this trend, although in
its case it has been milder. The real exchange rate has posted a marginal increase (figure 5).
This increase in the exchange rate is somewhat bigger if compared with its level before the
CBC began its foreign currency purchase program. The persistently weak dollar at the global
level has resulted in the real exchange rates of various economies hitting or approaching the
record lows of the last decade (figure 6). Hence, Chile's real exchange rate is in levels
consistent with its long-term fundamentals. The baseline scenario uses as a working
assumption that it will remain flat over the coming quarters.
In recent months, inflation has continued to be dominated by increases in the prices of
foodstuffs and fuels. Around two thirds of inflation accumulated between March and May
owes to these two factors combined (figure 7). Core inflation, particularly the CPIX1 variation,
is still limited, showing no unusual propagation of these shocks.
The baseline scenario assumes that headline inflation will rise somewhat less than forecast
in March. CPI inflation will end the year at four percent, to remain fairly constant for some
months. In 2012, it should converge to three percent and stay near the target until the end of
the projection horizon, this time the second quarter of 2013. Core inflation is expected to rise
further and gradually converge to three percent. Private projections are consistent with this
scenario of lower inflation throughout the projection horizon (figure 8). This projection is
based on the assumption that, on average, output gaps will be closed throughout the
projection horizon, and that the propagation of specific price shocks will continue to match
the historic average, as it has in recent months. As for monetary policy, forecasts use as a
working assumption that the monetary policy rate will follow a path comparable to the one
that can be inferred from several expectation indicators (figure 9).
As usual, there are risks that may cause the macroeconomic scenario described here to
deviate from projections. On this occasion, the Board estimates that the risk balance for
inflation and output is unbiased.
Although milder than in March, one important risk is the persistence and propagation of the
specific price shocks of the past few quarters. While fairly stable commodity prices are
assumed for external markets, a scenario of higher prices significantly affecting local inflation
because of the current status of output gaps cannot be ruled out. The labor market is
showing important strength, with the rate of unemployment in low levels by historic standards
and a substantial increase in employment, while various sources of information speak of the
difficulties in hiring skilled labor in some regions and economic sectors. The y-o-y increase in
wages is up from end-of 2010 (figure 10). However, the combination of increased
employment, higher wages and stronger economic growth has allowed unit labor costs to
vary in line with the inflation target. Accordingly, the behavior of the labor market must be
closely monitored in order to prevent the incubation of inflationary pressures.
The evolution of output and demand is also important in this setting. If they keep on growing
as strongly as they did in the first quarter, an over-utilization of installed capacity may result,
generating inflationary pressures. We have paid particular attention to consumption;
however, it is unlikely that the current dynamism can be sustained very long. From a longer
perspective, the recent increase in consumption may be responding to a recovery from the
crisis of 2008-2009 and the earthquake and tsunami of 2010. Estimates of the ratios
between consumption, income and their trend levels show no significant differences
(figure 11). In addition, a substantial part of the consumption components that show the
larger increases - durables and clothing - is generally of imported origin, so a lower
exchange rate favors consumption and replacement, especially considering that their rate of
depreciation may have accelerated in tandem with technological change. This is
compounded by the low prices of these goods in dollars.
Meanwhile, growth in consumer credit, although showing a higher velocity in the margin, has
not posted any increases like the ones observed in previous expansion phases or in other
emerging economies (figure 12). About the implications of credit behavior, the IEF states
that, so far, indebtedness has not risen above its long-term trend. Thus, for borrowing to
configure a scenario of systemic risk, it would have to grow in the future at an all-time-high
speed. Furthermore, households' banking credit risk indicators show sustained improvement
and tend to stabilize in the past year (figure 13 and table 3). Despite this, it is important that
intermediaries keep a watchful eye in this stage of the cycle.
These days we have learned of the severe financial situation of a retail store - La Polar -
after its Board members recognized the existence of unauthorized reprogramming of credits
to defaulting clients. These practices are very serious and have caused severe damage to
both clients and investors.
Despite the severity of the La Polar situation, every technical evaluation we have made lead
us to conclude that it does not jeopardize the financial system's stability and that its effects
on the payment system are limited.
As we underscore in the IEF we are presenting today, the Chilean banking system is solvent
and liquid, therefore capable of absorbing the frail financial position of La Polar. The analysis
contained in this Report also indicates that there is no generalized over-borrowing problem
among Chilean households.
Our analysis of information collected in the Households' Financial Survey confirms this view.
Households' borrowing patterns, especially in the lower-income segments, have not changed
significantly before or after the global financial crisis. This is relevant, because pre-crisis
analyses show a relatively robust repayment capacity of households. According to this
source, the households that have the larger debts are those less likely to lose their income.
Meanwhile, after the global crisis of 2008-2009, estimates suggest that the fraction of
households in a situation of financial risk is around 4 percent, close to where it was in 2007.1
Information made public point to severe problems in the corporate governance of this
company, with irresponsible lending policies and major abusive deficiencies in the
information on their credit portfolio that was delivered to investors and supervising
organizations. It is also likely that the law has been broken with respect to the delivery of
information and the operation of the lending activities.
This has triggered a discussion over the role that different organisms should have played,
including management, the board of directors, auditors and risk-rating agencies. Certainly
there have been grave irregularities that need clarification. It is also necessary to establish
any potential flaws of our regulatory and supervisory framework.
I would like to say, however, that at this time we must let the mechanisms of supervision and
sanction provided for in the laws governing the securities and stock markets do their work.
Also, those responsible for the damages caused must be investigated and punished with all
the rigor of the law for their wrongdoing. Episodes like this one should never occur again.
This case brought to light two important flaws from which we must draw lessons in
legislation, regulations and control. What we have now is obviously insufficient. The first one
has to do with the defense of the financial customer. It clearly needs strengthening.
Reinforcing the financial area of the Consumer Service Office (SERNAC) and the
implementation of standardized credit contracts - with very clear rules for reprogramming
and forbidding abusive practices - point in that direction. The second such flaw refers to
investor protection; it is necessary to ensure that investors receive reliable information and
are spared the deceptions that seem to have occurred in this case. The Bank is readily
available to cooperate in these discussions.
Another important aspect of the operation of the retail industry is safeguarding the normal
functioning of the payment system, in as much as there are stores that will accept credit
cards from retail stores as a means of payment. In concrete, what is sought is to ensure that
businesses associated the credit card receive what is due them at the right time. This aspect
is regulated in the bylaws of the Central Bank. Here I want to note that the payment system,
which is one of the Central Bank's responsibilities entrusted it by Law, has operated
adequately.
Going back to the description of the macroeconomic scenario and associated risks, in the
world economy the recent behavior of economic indicators, especially in developed
countries, could be signaling a more protracted weakening of growth there. This scenario
must be carefully evaluated, because other temporary factors related with the disruptive
effects of the Japanese earthquake and the oil price hike may have played a role in recent
developments. Should this risk of further weakening of developed countries materialize, the
difference of the pace of growth with emerging economies would widen. This would
exacerbate the interest rate differentials around the world, increasing capital flows toward
emerging markets and aggravating forex tensions, obstructing macroeconomic policy
making. Add to this that the risks in some European economies have intensified substantially
these days and so far there is no defined solution, which has worsened the tensions in
financial markets. Moreover, global imbalances are still unresolved, and it is unclear how the
major adjustments needed for the fiscal consolidation of part of Europe and the United States
will proceed. And it becomes more uncertain when considering that they must take place in
an environment of lagging private demand and a still complex financial situation in banks,
with large funding needs, exposure to public debt and a significant interconnection within
Europe.
Far from over is also the concern about the way in which monetary policy makers in
emerging economies will continue to deal with inflationary pressures. This is especially
relevant in Asia, where some economies show signs of narrowing output gaps and growth
rates above the trend. The possibility of a sharper adjustment in these economies' growth
rates, particularly in China, would impact world GDP and commodity prices.
The IEF looks at these risks, and concludes that the biggest challenges for the Chilean
financial system are associated to a prudent management of the favorable external financing
conditions that should exist in the baseline scenario, but that might be reversed in many of
the risk scenarios I have just mentioned.
Accordingly, this Report puts special emphasis in evaluating the creation of risks associated
with increased borrowing abroad by financial intermediaries and firms, especially maturity
and currency mismatches and an overvaluation of key financial assets. This, within a context
of gross capital flows that are relatively high by historic standards and compared with other
emerging economies (figure 14). Our analysis of the present situation yields as its main
conclusion that there is no evidence of vulnerabilities being created associated to gross
capital inflows with systemic implications.
With regard to enterprises, the IEF highlights that the bulk of the funds they get from abroad
comes in the form of foreign direct investment (FDI), particularly profit reinvestment.
Meanwhile, although the external debt has increased, the main financial ratios of the larger
firms and the currency mismatches have been stable (figure 15).
In the case of banks, there is also an increase in their external debt. It is worth noting,
however, that this has not been associated to larger currency mismatches in the banks'
balance sheets, nor to increased credit in foreign currency to firms whose income is in pesos.
The maturities of such debt have been extended, contributing to the solid situation of the
banking industry, despite the increase in lending activity. Finally, on aggregate, the indicators
of international solvency of the Chilean economy - such as the net international investment
position and the current-account deficit - remain stable with a marginal improvement of the
liquidity position.
Overall, in the scenario we estimate today to be the most likely, the Chilean economy will
operate in a favorable context. Risks persist, however, that must be taken into careful
consideration, both because of their implications for monetary policy making and because of
their associated risks for our economy's financial stability.
Now let me make a few remarks.
Final remarks
The Chilean economy has recovered strongly from the 2009 recession, and the different
variables are beginning to converge to their estimated equilibrium levels. Output gaps are
closed, unemployment is down, and trend inflation remains below the lower limit of the
target's tolerance range, but gradually approaching three percent. Thus, the monetary policy
rate should be around its neutral level, neither increasing nor reducing aggregate demand
with respect to its trend.
In the scenario we consider to be the most likely given present-day and expected conditions,
the larger part of the adjustment to the MPR we began in June 2010, and which has
amounted to an increase of 475 basis points, has already been completed. In this scenario,
we use as a working assumption that the MPR will be within the range of values that have
historically been considered neutral. However, we must keep in mind that the behavior of
both the domestic and the external economy in the past several years may have changed
those ranges, introducing a high degree of uncertainty about the true short-term level of the
neutral MPR. All in all, exactly how far and when we will take the MPR in the current cycle is
something the Board will be analyzing with incoming information on the evolution of the
Chilean economy and the international scenario.
It is worth pausing for a few moments to take a look at the evolution of the world economy. In
our most likely scenario, we estimate that the world will continue to add momentum to Chile's
GDP growth, although gradually declining in the coming quarters. However, as I already
mentioned, there are important risks. Developed economies may enter a stage where output
fails to pick up and new economic policy efforts are needed to boost growth. The big problem
they are facing is the exhaustion of their traditional policy tools. Fiscal policy has no room left
for expansion due to the size of their debt, and monetary policy is already in the lowest
possible interest rates.
The emerging world - Chile included - faces a different challenge: how to prevent our
economies from expanding above trend. Luckily, as an outcome of our own actions, we have
the policy tools to deal with this scenario. At the same time, in case of a further deterioration
of the global economy, we have a sufficiently flexible monetary policy to mitigate its effects
on our domestic economy and preserve the necessary equilibriums for sustainable
improvement in the welfare of the population. Our task consists, then, in properly managing
the policies and safeguard said equilibriums.
Therefore, and taking into account the risk balance we face, the most advisable thing to do is
to continue withdrawing the monetary impulse. The timing of these changes will be analyzed
at each meeting, including pauses to assess the effects on the economy of adjustments
already made.
Accordingly, as it has done in the past, the Board will adopt every necessary measure to deal
with events that reshape the macroeconomic scenario and inflation prospects. Inflation is an
evil that hits hardest the people with less income. Despite reduced risks of a significant
increase in inflation, we must remain on the watch for pressures incubating that might
obstruct the convergence of inflation to the target and that, ultimately, impose higher costs to
the society as a whole. As I have said time and again, the best contribution that the Central
Bank can make to the country's development is to keep inflation low and stable, providing the
grounds for sustainable growth. Thus, the Board will continue to guide its monetary policy so
that projected inflation stands at three percent over a two-year horizon.
Thank you.
Figure 1
Inflation indicators
(annual change, percent)
12 12
10
1086420
-2 86420-2
-4 -4
06 07 08 09 10 11
CPI CPIX CPIX1 CPI w/o foodstuffs and energy
Sources: Central Bank of Chile and National Statistics Institute.
Figure 2
Inflation expectations
(percent)
90 90
7 7
80 80
6 6
70 70
5 5
60 60
4 4
50 50
3 3
40 40
2 2
30 30
1 1
20 20
0 0
06 07 08 09 10 11
06 07 08 09 10 11
Perceived IPEC inflation (2)
EES at December 2011 FOS 1 year ahead (1)
FOS 2 year ahea (1) EES 1 year ahead
IMCE costs in 3 months (3)
EES 2 year ahead
(1) Financial operators survey (FOS) of first half of the month. (2) Percentage of respondents who believe that inflation will rise
"much" in the next twelve months. (3) Number above (below) 50 points denotes higher (lower) costs three month ahead.
Fuentes: Adimark, Banco Central de Chile y Universidad Adolfo Ibañez/Icare.
Table 1
Economic growth and current account
(annual change, percent)
2009 2010 2011 (f)
GDP -1.7 5.2 6.0 - 7.0
National income -1.9 15.7 6.9
Domestic demand -5.9 16.4 8.5
Domestic demand (w/o inventory change) -2.9 11.5 9.2
Gross fixed capital formation -15.9 18.8 11.9
Total consumption 1.9 9.3 8.3
Goods and services exports -6.4 1.9 7.1
Goods and services imports -14.6 29.5 11.0
Current account (percent of GDP) 1.6 1.9 0.0
(f) Forecast.
Source: Central Bank of Chile.
Table 2
World growth
(annual change, percent)
Average 2009 2010 2011 (f) 2012 (f)
00-08 (e) IPoM IPoM CF IPoM IPoM CF
mar. jun. may. mar. jun. may.
11 11 11 11 11 11
World at PPP 4.0 -0.6 4.9 4.1 4.1 4.2 4.4 4.5 4.6
World at market exchange rate 3.1 -2.1 3.8 3.0 3.2 3.3 3.7 3.8 3.9
United States 2.3 -2.6 2.9 3.0 2.7 2.7 3.2 3.2 3.2
Eurozone 2.0 -4.1 1.7 1.3 1.7 1.7 1.5 1.5 1.7
Japan 1.4 -6.3 4.0 0.8 -0.6 0.0 2.3 3.1 2.8
China 10.4 9.2 10.3 8.9 8.9 9.3 8.7 8.6 8.9
Rest of Asia 4.9 0.1 7.7 4.5 4.8 5.0 5.0 4.9 5.2
Latin America (excluding Chile) 3.6 -2.0 6.4 4.2 4.2 4.4 4.2 4.3 4.3
Commodity exporters 2.9 -1.0 2.9 2.6 2.7 2.7 3.0 3.0 3.2
Trading partners 3.5 -0.3 5.9 4.4 4.3 4.6 4.6 4.7 4.9
(e) Estimate. (f) Forecast.
Sources: Central Bank of Chile based on a sample of investment banks, Consensus Forecasts, the IMF .
and statistics bureaus of respective countries.
Figure 3
Commodity prices (1) (2)
(index, May 2010- June 2011=100) (monthly index, 2006=100)
250 250
140 140
200 200
120 120
150 150
100 100
100 100
80 80
50 50
60 60
0 0
jun.10 oct.10 feb.11 jun.11 06 07 08 09 10 1111(f)12(f)
Jun.10 Oct.10 Feb.11 Jun.11
Energy Metals Grains & cereals
Copper Oil Foodstuffs, FAO
(1) Left chart shows indexes of aggregated S&P GSCI. (2) Right chart uses data up to May 2011 for
foodstuffs, up to June for oil and copper. (f) Dots indicate average prices forecast for 2011 and 2012 in
June 2011's Monetary Policy Report.
Sources: Central Bank of Chile and Bloomberg.
Figure 4
Actual and expected monetary policy rate in the world (1)
(percent)
24 24
20 20
16 16
12 12
8 8
4 4
0 0
97 99 01 03 05 07 09 11
Developed economies (2) Emerging economies (3) Chile (4)
(1) Solid lines show simple average of reference rates of each group of countries. For the regions, dots show the median of
Bloomberg's survey to analysts on the expeted MPR for June 2011, September 2011, December 2011, March 2012 and June
2012. Chile uses June's EES for the rate expected for July 2011, November 2011, December 2011 and May 2012. (2) Includes
the Eurozone, Japan, the U.K. and the U.S. (3) Includes Brazil, China, Colombia, the Czech Republic, Hungary, Mexico, Peru,
Figure 5
Real exchange rate (*)
(index, 1986=100)
120 120
110 110
100 100
90 90
80 80
70 70
91 93 95 97 99 01 03 05 07 09 11
TCR 1991-2010 average 1996-2010 average
(*) Information at 14 June 2011.
Source: Central Bank of Chile.
Figure 6
Real exchange rates in the world
(index, average January 2000 - April 2011=100)
180 180
160 160
140 140
120 120
100 100
80 80
60 60
U.K.
Rep.
India
Chile
Rusia Israel Japan
Brazil Africa China Korea
U.S.A.
Poland
Turkey
Mexico
Canada Norway
Zealand
Hungary Malaysia
Australia Thailand
N.
Czech Philippines
South
South
Range (*) Spot Average
(*) The range indicates maximum and minimum values shown by the currency during specified period.
Sources: Central Bank of Chile and Bank for International Settlements (BIS).
Figure 7
Incidences in monthly CPI inflation (*)
(percentage points)
1.0 1.0
0.8 0.8
0.6 0.6
0.4 0.4
0.2 0.2
0.0 0.0
-0.2 -0.2
-0.4 -0.4
-0.6 -0.6
-0.8 -0.8
10 Mar. May Jul. Sep. Nov. 11 Mar. May
Foodstuffs minus fresh fruits and vegetables (21.3%)
Other (64.7%)
Fuels (5.7%)
Fresh fruits and vegetables (2.9%)
Public utilities (5.4%)
CPI
(*) In parentheses, shares in CPI basket.
Sources: Central Bank of Chile and National Statistics Institute.
Figure 8
CPI inflation (*) CPIX1 inflation (*)
(annual change, percent) (annual change, percent)
10 10 10 10
8 8
8 8
6 6
6 6
4 4
4 4
2 2
2 2
0 0
0 0
-2 -2
-2 -2
-4 -4
-4 -4
07 09 11 13
07 09 11 13
IPoM Mar.2011
Report Jun.11
(*) Gray area, as from second quarter 2011, shows forecast.
Sources: Central Bank of Chile and National Statistics Institute.
Figure 9
MPR and expectations
(percent)
9 9
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
07 08 09 10 11 12 13
MPR EES June 2011 FOS June 2011 (*)
Forward, Report June 2011
(*) FOS considers survey of first half of the month.
Source: Central Bank of Chile.
Figure 10
Employment & unemployment (1) Real wages (2)
(index, centered on mean of period (annual change, percent)
1990-2011)
9 9
40 40
6 6
20 20
3 3
0 0
0 0
-20 -20
-3 -3
-40 -40
01 03 05 07 09 11
90 93 96 99 02 05 08 11
Unempl. Employment
L.C. Rem. Index
(1) Seasonally-adjusted series. (2) Dashed lines show average for period 2001-2011.
Source: Ricaurte, M. 2011. "Indicadores de Mercado Laboral para la Comparación de las Crisis Asiática y
Financiera Internacional". Preliminary document. Central Bank of Chile, June.
Figure 11
Private consumption and income
(annual change, percent)
15 15
12 12
9 9
6 6
3 3
0 0
-3 -3
04 05 06 07 08 09 10 11
Wage mass Private consumption Private disposable income (*)
(*) Yearly moving average.
Source: Central Bank of Chile.
Figure 12
Growth in loans
(annual change, percent)
Chile (1) Emerging economies (3)
60 60
90 90
50 50
75 75
40 40
60 60
30 30
45 45
20 20
30 30
10 10
15 15
0 0 0 0
-15 -15 -10 -10
90 93 96 99 02 05 08 11 06 07 08 09 10 11
Housing Consumer Corporate (2)
Brazil Colombia China Chile
(1) Preliminary figures for May 2011. (2) Sum of commercial loans and foreign trade loans. (3) For Brazil, figures
cover up to February 2011. For China and Colombia, up to March 2011.
Sources: Central Bank of Chile, International Monetary Fund and Superintendence of Banks and Financial Institutions.
Figure 13
Indebtedness and financial burden
(percentage of disposable income)
80 20
60 15
40 10
20 5
0 0
02.IV 04.IV 06.IV 08.IV 10.IV
Total debt (RDI)
Long-term financial burden (RCI)
Sources: Central Bank of Chile based on information from SBIF, SuSeSo and SVS.
Table 3
Household debt
(real annual change, percent)
20022008 2009 2010 2011 Contribution to
Share in debt
2007 (1) IV IV I II III IV I growth (2)
Mortgage 14.1 12.9 7.3 7.7 8.6 9.0 7.0 7.6 4.2 55.8
Bank 15.3 13.1 8.6 9.2 10.0 10.4 9.0 9.3 4.5 49.3
Non-bank (3) 8.2 11.7 -0.5 -1.6 -1.0 -0.5 -6.0 -4.3 -0.3 6.3
Consumer 17.9 3.9 1.8 2.3 4.7 5.8 8.1 9.5 4.2 44.5
Bank 16.0 -0.3 2.2 2.7 5.1 7.5 8.6 11.8 2.8 24.3
Non-bank 20.7 9.1 1.4 1.9 4.3 3.8 7.6 6.8 1.4 20.2
Retail stores 27.6 9.3 -7.9 -6.4 -1.2 3.6 11.9 10.4 0.7 7.0
CCAF (4) 19.9 9.6 8.3 7.5 6.9 1.3 2.9 6.2 0.3 4.4
Cooperatives 25.2 11.6 5.6 3.3 9.5 5.2 1.9 0.8 0.0 2.6
Other (5) 13.5 7.6 6.7 7.6 6.8 5.2 8.8 6.1 0.4 6.3
Total 15.8 8.7 4.8 5.3 6.8 7.6 7.5 8.4 8.4 100.0
(1) Average. (2) Percentage points. (3) Includes securitized mortgage debt. (4) Clearance houses (family). (5) Includes new car
loans, college debt and insurance companies.
Sources: Central Bank of Chile based on information from SBIF, SuSeSo and SVS.
BIS central bankers' speeches
Figure 14
Gross capital inflows and outflows (1)
(percentage of GDP)
Chile (2) Emerging economies (3)
20 20 8 8
15 15
6 6
10 10
4 4
5 5
2 2
0 0
0 0
-5 -5
-2 -2
-10 -10
-4 -4
-15 -15
-6 -6
-20 -20
90 94 98 02 06 10
90 94 98 02 06 10
Gross portfolio inflows & debt
Gross inflows
Net flows
Gross portfolio inflows and debt
(