José De Gregorio: Chile's latest Monetary Policy Report
Presentation by Mr José De Gregorio, Governor of the Central Bank of Chile, of the
Monetary Policy Report before the Finance Commission of the Honorable Senate of the
Republic, Santiago de Chile, 4 April 2011.
The Monetary Policy Report of March 2011 can be found at http://www.bcentral.cl.
* * *
Introduction
Mr. President of the Senate's Finance Commission, senator Eduardo Frei, senators. I am
grateful for the Commission's invitation to the Board of the Central Bank of Chile to share
with you our vision of recent macroeconomic developments, their prospects and implications
on monetary policy, as detailed in our Monetary Policy Report of March 2011.
The data at hand on the last few months show that our country continues to walk a path of
sustained economic recovery. The year 2010 closed with a y-o-y growth rate of 5.2 percent,
with very strong consumption and investment. To a large extent, the devastation inflicted on
our economy by the world recession of 2008-2009 and the earthquake and tsunami of
27 February 2010 has been left behind. Employment is growing strongly and trend inflation
has returned to above zero annual variation rates.
The strong impulse of macroeconomic policies has been at the center of these results, and
the recovery of the Chilean economy attests to the efficacy of our economic policy
framework. However, although the challenges posed by the aforesaid events have been
largely overcome, today we face new ones. As we noted in the presentations we made
before this Commission and the Senate in full last December, the world economy is
undergoing a process of recovery in two speeds, generating significant foreign exchange
tensions.
In early January the Board announced a program of foreign-currency purchases to alleviate
these tensions and increase Chile's international reserves to match those of other emerging
economies. Such program involves the purchase of 12 billion US dollars over a period that
ends in December this year. Three months into the process, the Bank has bought a little over
3 billion dollars. The peso/dollar parity is now around 3 percent above the level that prevailed
before the purchase announcement, fluctuating in the range of 465 to 500 pesos per dollar.
The overall trends that have determined an appreciation of the currencies of most emerging
economies - including the Chilean peso - are still present. We believe that without the
intervention the peso would have appreciated even more.
The resolution of growth imbalances around the world will probably take some time, but
sooner or later the differences between emerging and developed economies will narrow,
mitigating pressures on our currency. Beyond these fluctuations, the gains in
competitiveness that our country needs in order to remain on the path to development will be
achieved not with actions that artificially increase the level of the nominal exchange rate, but
rather with structural reforms that will improve productivity and, therefore, the competitive
stance of our exports.
The many differences in the speed of the economic recovery in the world has combined with
foreign exchange tensions and, in the past few months, increased inflationary pressures at
the global level. Food prices, responding to the stronger demand of emerging economies and
to worsened supply-side conditions, have skyrocketed, rising even faster than between early
2007 and mid-2008. Add to this the sustained increase in the oil price since mid-2010, which
intensified last February because of the political unrest in the Middle East and Northern
Africa.
Under these circumstances, today monetary policy faces an important challenge. Like after
the global financial debacle of 2008, when it was highly flexible in responding to the
confidence crisis around the world, now it must again be flexible in withdrawing the monetary
stimulus, creating the conditions for sustainable growth and acting preventively to avoid a
resurgence of inflation. Since last December, the Board has raised the monetary policy
interest rate (MPR) by 75 basis points to 4 percent in the meeting of last March. In the
scenario we consider the most likely, we will continue to remove the monetary stimulus, at a
pace that will depend on unfolding macroeconomic conditions, but which will be principally
oriented to achieving the inflation target. Now let me describe the factors that underlie the
most likely scenario and the main risks it faces.
Macroeconomic scenario
In the last few months, y-o-y CPI inflation, in line with projections in December's Report, has
hovered around the target, with an annual variation of 2.7 percent at February. Core
indicators have returned to positive, yet still low (figure 1). Nonetheless, as I said, even if
actual inflation continues to be aligned with the target and our previous forecasts, the latest
developments have increased our concern for inflation, as they have in other economies. In
the emerging world, growth has proceeded as expected, within an environment where
foreign exchange tensions remain and commodity prices continue on the rise, especially for
oil and foodstuffs (figure 2). This latter phenomenon has shaped a scenario of higher inflation
and, accordingly, higher expectations.
Actual inflation has already begun rising in developed economies. In the U.S. it went from
1.1 percent annually in September 2010 to 2.1 percent in February this year, and in the
Eurozone it went from 1.9 percent to 2.4 percent over the same period. Worth noting is the
behavior of inflation in the U.K., where it has been above the 2-percent target since
December 2009 and now stands at somewhat more than 4 percent. Partly as a result of the
wide output gaps that persist in these economies, core inflation remains in low levels
(figure 3). Emerging economies have seen inflation's velocity of expansion begin rising,
especially for core inflation in Asia. The higher international prices of foodstuffs have a strong
impact on inflation in these economies, considering that they weigh more in their CPI
baskets.
Inflation forecasts for 2011 have been raised everywhere. Worth noting is the case of
emerging Asia, where by mid-2010 the market consensus expected inflation to average
3.8 percent annually this year, and revised it upward to 4.8 percent last March (figure 4). The
baseline scenario assumes that during this year the external inflation relevant to Chile will
exceed December's forecast.
In this scenario, the central banks of several economies have either started or continued their
monetary policy normalization processes, implying that inflation might be temporarily above
their targets, which coincides with the market consensus expectations. Some of them have
continued applying alternative measures to tone down increases in liquidity and credit, such
as China, India, Brazil and other countries in the region. In some developed economies,
although monetary policy has remained very expansionary - with unconventional measures
and record-low interest rates - policy makers have explicitly exposed their concerns about
future inflation and a few have even considered the option of beginning their cycle of
normalization sooner. Thus, in the U.S. and Europe, market expectations regarding the
timing of the process's kick-off have changed (figure 5).
Hence, the outlook for world economic growth is somewhat brighter than it was last
December. Actual output data in developed economies, especially in the U.S., have
exceeded expectations and market consensus projections have been revised upwards. For
2011, the world growth forecast assumed in this Report's baseline scenario is three decimal
points higher than in December. Financial tensions relating to the situation in some European
economies are still in place. The catastrophe in Japan has sounded an alarm, but so far its
effects are believed to be limited primarily to the Japanese economy (table 1).
In Chile, output gaps have behaved as predicted, leading to a normalization of the inflation
trend. As I said before, in 2010 GDP grew 5.2 percent, so we believe output gaps are closed
(figure 6). The strength of domestic demand, particularly for consumption, has been at the
center of this phenomenon. Labor gaps have narrowed, with a fast increase in employment
and higher wages.
This performance of the economy reflects to a great extent the impulse of monetary policy to
domestic expenditure and the world's economic recovery. For 2011, the Board foresees that
GDP growth will be in the range of 5.5 to 6.5 percent, the same it forecast in December
(table 2). This scenario is coherent with output gaps remaining closed over the entire
projection horizon.
The recent dynamism of the economy will moderate in line with the reduced impulse from
macroeconomic policies. As for monetary policy, our projections use as a working
assumption that the MPR will follow a path that is comparable with the one that can be
inferred from the various expectations surveys (figure 7). For the case of fiscal policy, the
working assumption is that fiscal expenditure will increase this year less than will output,
consistently with the recent announcement of the government on the matter, to subsequently
converge to a structural deficit of 1 percent of GDP until the end of the current
Administration's term.
In the baseline scenario, the cyclical situation of the Chilean economy plus the withdrawal of
the macroeconomic stimulus will result in y-o-y CPIX1 inflation moving from its present level
of around 0.5 percent to a little over 3 percent in the early part of 2012 (figure 8). It is
expected to then oscillate around the target until the end of the projection horizon, that is, the
first quarter of 2013. Headline inflation, meanwhile, will surpass the upper bound of the target
range, largely due to the effects of higher prices of oil and oil derivatives. The baseline
scenario assumes that the oil price will average somewhat more than 100 dollars per WTI
barrel in the two-year period 2011-2012. Accordingly, annual CPI inflation will stand above
4 percent for the entire second half of this year and into 2012. For December 2011, it is
forecast at 4.3 percent, which compares with 3.3 percent assumed in December. Inflation
projections for the latter part of this year have been revised upward in many economies
around the world, even before the oil shock intensified (figure 9). As for the inflation forecast
used in this Report's baseline scenario, a large part of the change responds to the direct
impact of the fuel price increase. In the case of non-perishable foodstuffs, actual inflation
data for the last few months show an increase that reflects December's projections. The
baseline scenario assumes that it will continue to rise at annual rates in the order of 4 to
5 percent during 2011 (figure 10).
Thus, the Board foresees that annual CPI variation will return to the tolerance range during
the second quarter of 2012 and will stay at 3 percent until the end of the year. This forecast
assumes that the propagation of price increases in foodstuffs and oil will follow historic
experiences. It also assumes that the economy will grow at a pace consistent with its
capacity, limiting the propagation of these shocks to other prices and to labor cost pressures.
Private inflation expectations are similar to those described in the baseline scenario. March's
Economic Expectations Survey (EES) shows an inflation rate at December of this year of
4.4 percent. The Financial Operators Survey for the second half of March shows inflation one
year ahead at 4.4 percent. These two figures are slightly higher than they were in December
2010. For the medium term, expectations also rise and the EES of March foresees inflation
two years ahead at 3.2 percent (figure 11). With respect to end-of 2010, breakeven inflation
figures derived from financial asset prices have also increased for all the different terms.
Likewise, business and consumer confidence surveys show increased concerns about
inflation.
As usual, there are various risks that could shape a different macroeconomic scenario. On
this occasion, the Board believes the risk balance for both inflation and output is biased
upward.
The main risk to inflation has to do with the size, persistence and propagation of the shock to
commodity prices, especially oil. Internationally, as I said, the baseline scenario assumes
that the oil price will be high and fairly stable. However, it may happen that the political
tensions in some oil-exporting countries continue or intensify, resulting in a steeper upward
trend. The global effects of such a setting are clearly inflationary in the immediate future,
while further down the line its combined effects on world demand and interest rates may
moderate world economic activity (table 3). In the case of foodstuff prices, current aggregate
indexes are above their peak of 2007-2008, although the composition of products showing
the bigger increases differs. In any case, the velocity of these hikes has been greater than
that of the last episode (figure 12). Both futures prices and analysts' projections assume that
the prices of these products will not increase further but will rather tend to normalize. Still, it
cannot be ruled out that if supply-side problems in the agricultural sector persist within a
context of strong growth in emerging economies, pressures on the prices of foodstuffs may
be intensified.
Regarding the internal propagation of the shock to commodity prices, food prices have
increased less locally than internationally, indicating a compression of margins in the
industry. Overall, this compression reverses the expansion they posted in the second half of
2008 and throughout 2009, after the fall in external prices (figure 13). However, it cannot be
ruled out that, if international prices continue to rise, further effects on domestic inflation may
be observed.
As for oil, due to conditions inherent in this market, pass-through to consumer prices has
been instantaneous. Facing additional shocks, the stabilization system in place could help
smooth short-term fluctuations in fuel prices. Nonetheless, it is not its objective, in a
mediumterm horizon, to isolate local price movements from external ones. In addition, the effects
might be amplified if the availability of hydroelectric energy diminishes increasing the
dependence on thermal energy generation based on oil derivatives. Recall that in 2007-2008
energy prices rose considerably because of an electric production mix that was more
intensive in thermal generation at a time that the oil price was hitting record highs. Today, the
marginal cost of electric generation is 25 percent below its peak of 2008 (figure 14).
Another difference between the current situation and the episode of 2007-2008 has been the
evolution of the exchange rate. Whereas then the exchange rate depreciated continually,
amplifying the effect of external price increases, in the past few months the peso-dollar parity
has shown large swings, and is now, as of the statistical closing of this Report, at around
CLP480 per dollar. After the Bank's announcement of the reserve accumulation program in
early January, the peso depreciated from some CLP465 per dollar to nearly CLP500 per
dollar. After that there was an appreciation trend that took it back to pre-intervention levels;
however, the effects of this measure have combined with external developments, in
particular the sustained weakness of the dollar at the global level and the copper price
increasing to all-time highs in nominal terms (figure 15). Thus, since its peak of late 2008, the
appreciation of the peso against the U.S. dollar has not differed much from that of the
currencies of commodity-exporting countries or other economies that have intervened or
applied administrative measures in their forex markets (figure 16).
The real exchange rate (RER) followed the trend of the multilateral parity, which has
depreciated since December. Considering the level of the nominal exchange rate and
parities prevailing at the statistical closing of this Report, in March the RER posted figures in
line with its long-term fundamentals (figure 17). The baseline scenario of this Report uses as
a working assumption that the RER will stay near its recent levels.
Regarding the propagation of the relative price shocks to the overall economy - or
secondround effects - one important factor is significantly related with the sensitivity of inflation
expectations to the short-term behavior and the flexibility of real wages. It is possible that, if
the economy sustains its dynamism beyond its installed capacity, it may foster a greater
propagation of these shocks to other prices and to labor costs, heightening its inflationary
effects. As I said before, the baseline scenario assumes that gaps will remain closed over the
projection horizon, but the possibility remains that output and demand grow above forecasts,
thus exceeding the normal use of the economy's productive capacity and exacerbating
inflationary pressures. Conversely, increased prices of fuels and other products affect the
consumers' disposable income and, thereby, can become a factor moderating expenditures
in other goods and services.
In the international scenario, financial tensions remain in some European countries and
global imbalances are far from being resolved. There are also doubts regarding how tight
output gaps are and how strong are inflationary pressures in some emerging economies,
especially in Asia, and how will policy makers and investors respond to the signs of higher
inflation that are appearing. Considering the experience of 2007-2008, this might trigger a
monetary policy reaction that could cause a more pronounced slowdown in the demand of
emerging economies, with important consequences on world growth and commodity prices.
On the other hand, it is also possible that the different paces of recovery between emerging
and developed economies and the exchange rate tensions in place result in a delay in the
withdrawal of the monetary stimulus, causing an immediate increase in global inflation and
calling for more aggressive monetary policy responses later on.
Conclusions
Today monetary policy conduct is facing an important challenge. Headline inflation is near
the target and trend inflation is back to above-zero figures, albeit still substantially below
3 percent. However, inflationary pressures have increased globally raising inflation forecasts,
spreading concerns about future inflation in the different economies, including our own. The
recovery process of the Chilean economy has consolidated and output gaps are closed.
As I said a while ago, the increases we have seen in international prices of foodstuffs and oil
will result in total inflation surpassing the upper bound of the tolerance range during some
quarters. Our main task today is to ensure that the convergence of trend inflation to the
target occurs with as few setbacks as possible. Monetary policy conduct will aim at the
inflationary trend remaining in levels consistent with the tolerance range, so that towards the
end of the projection horizon headline inflation stands around 3 percent.
There are important risks, though. The recent experience with international price shocks has
shown that preoccupation per se will not solve their inflationary consequences. It is
absolutely necessary to take action every time these shocks give signs that they may
propagate from specific sectors to the rest of the prices in the economy. Preventing such
propagation is the primary task of monetary policy. In this Report's baseline scenario, the
foreseen trajectory of monetary policy meets this objective.
In any case, as it has done in the past, the Board will adopt any necessary measures to deal
with events altering the macroeconomic scenario and the inflationary outlook. As our
country's economic history has shown, and reminded us unequivocally just a few years back,
inflation is an evil that hits especially hard those who have the least resources. The main
contribution that the Central Bank can make to the country's development is to keep inflation
low and stable, paving the way for sustainable growth. Making today the necessary changes
to monetary policy will avert more severe adjustments in the future that would certainly
increase the associated social costs. Accordingly, the Board will continue to conduct
monetary policy so that annual projected inflation into a two-year horizon stands at 3 percent.
Thank you.
Figure 1
Inflation indicators
(annual change, percent)
12 12
9 9
6 6
3 3
0 0
-3 -3
06 07 08 09 10 11
CPI CPIX CPIX1 CPI w/o foodstuffs and energy
Sources: Central Bank of Chile and National Statistics Institute (INE).
Figure 2
Commodity prices (*)
(index, 2009=100)
240 240
210 210
180 180
150 150
120 120
90 90
60 60
30 30
06 07 08 09 10 11
Edible oils Sugar Meats Dairy Cereals WTI oil
(*) Except for WTI oil, FAO indexes are used.
Source: Bloomberg.
Figure 3
Inflation
(annual change, percent)
CPI Core CPI (4)
10 10 6 6
8 8
5 5
6 6
4 4
4 4
3 3
2 2
2 2
0 0
-2 -2 1 1
-4 -4
0 0
05 06 07 08 09 10 11
05 06 07 08 09 10 11
U.S.A. Eurozone Latin America (1)
Emerging Asia (2) Emerging Europe (3)
(1) CPI anc Core CPI include: Brazil, Colombia, Mexico and Peru. (2) CPI includes China, Indonesia, Malaysia,
South Korea and Thailand. Core CPI includes South Korea and Thailand. (3) CPI includes Czech Rep., Hungary,
Poland and Russia. Core CPI excludes Russia. (4) Uses definition of each country.
Sources: Bloomberg, CEIC Data and statitics institutes of respective countries.
Figure 4
Inflation expectations for 2011 (1)
(annual change, percent)
8
7
6
5
4
3
2
1
0
Developed Latin America Emerging Asia Eastern Europe
economies (2)
(1) Average inflation of the year, with the exception of Latin America, which uses inflation at December
2011.
(2) Geometric average for the U.S., the Eurozone and Japan.
Figure 5
MPR in the world (1) Expected MPR (4)
(percent) (percent)
5 5
9 9
4 4
3 3
2 2
1 1
876543210 876543210
0 0
06 07 08 09 10 11 08 09 10 11 12
Developed economies (2)
U.S.A. Japan
Emerging economies (3)
Eurozone
Chile
(1) Simple average of reference rates for each group of countries. (2) Includes the U.S., Japan, the U.K. and the
Eurozone. (3) Includes Brazil, Colombia, China, the Czech Rep., Hungary, Mexico, Peru, Poland, South Africa and
South Korea. (4) Gray area indicates trajectory implicit in futures contracts. Dotted line shows market forecast at
the statistical cutoff of December's Monetary Policy Report.
Sources: Central bank of respective country and Bloomberg.
Table 1
World growth
(annual change, percent)
Average Average 2009 2010 2011 2012
90-99 00-08 (e) (f) (f)
World at PPP 3.0 4.0 -0.6 5.0 4.1 4.4
World at market exchange rates 2.8 3.0 -2.0 3.6 3.0 3.7
United States 3.2 2.3 -2.6 2.9 3.0 3.2
Eurozone 2.2 2.0 -4.1 1.7 1.3 1.5
Japan 1.5 1.4 -6.3 3.9 0.8 2.3
China 10.0 10.4 9.2 10.3 8.9 8.7
Rest of Asia 5.6 4.9 0.1 7.6 4.5 5.0
Latin America (excl. Chile) 2.7 3.7 -2.0 6.4 4.2 4.2
Commodity exporters 2.7 2.9 -1.0 2.8 2.6 3.0
Trading partners 3.1 3.6 -0.3 5.9 4.4 4.6
(e) Estimate. (f) Forecast.
Sources: Central Bank of Chile based on a sample of investment banks, Consensus Forecasts, the
International Monetary Fund and statistics institutes of the respective country.
Figure 6
GDP growth
(percent)
8 8
6 6
4 4
2 2
0 0
-2 -2
-4 -4
-6 -6
08 09 10 11 (1)
Annual change Quarter-on-quarter change (2)
(1) Dark blue shows growth range for GDP forecast for 2011 in Monetary Policy Report of March 2011. (2) Seasonally-adjusted
series.
Source: Central Bank of Chile.
Table 2
Economic growth
(annual change, percent)
2009 2010 2011 (f)
GDP -1.7 5.2 5.5-6.5
Domestic demand -5.9 16.4 7.6
Domestic demand ((w/o inventory change) -2.9 11.5 8.7
Gross fixed capital formation -15.9 18.8 13.9
Total consumption 1.9 9.3 7.0
Goods and services exports -6.4 1.9 6.8
Goods and services imports -14.6 29.5 9.6
Current account (% GDP) 1.6 1.9 1.2
(f) Forecast.
Source: Central Bank of Chile.
Figure 7
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
EES Mar.11 FOS 2Q Mar.11 MPR
Source: Central Bank of Chile.
Figure 8
CPIX1 inflation (*) CPI 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 IPoM dic. 2010
(*) Gray area, as from first quarter of 2011, indicates forecast.
Figure 9
Inflation deviations from target
(percentage points)
U.K. (1)
Thailand
Israel
Indonesia
N. Zealand (2)
Turkey
Indonesia
Chile
Brazil
Brazil
S. Korea
Canada
Canada
U.K.
Thailand
Israel
Hungary Peru
Poland Mexico
Mexico
N. Zealand
Eurozone (1) Colombia
Philippines Hungary
Australia (2) Czech Rep.
Colombia Poland
S. Korea
Peru
Sweden South Africa
Australia
Czech Rep.
Philippines
Chile
Switzerland
Switzerland
Sweden
South Africa
Eurozone
Norway
Norway
Turkey
-2 -1 0 1 2 3
-2 -1 0 1 2 3
(1) Harmonized series. (2) Spot inflation at fourth quarter 2010. (3) Inflation projected by March's Consensus
Forecasts. For Chile, baseline projection in March 2011's Monetary Policy Report.
Sources: Bloomberg and Consensus Forecasts.
Figure 10
Incidences on annual CPI inflation (1) (2)
(percentage points)
12 12
9 9
6 6
3 3
0 0
-3 -3
01 02 03 04 05 06 07 08 09 10 11 12 13
Other (64.7%) Fresh fruits and vegetables (2,9%)
Foodstuffs w/o fresh fruits and vegetables (21.3%) Fuels (5.7%)
Public utilities (5.4%) Total
(1) Gray area, as from first quarter 2011, indicates breakdown of inflation forecast in baseline scenario. (2) In parentheses,
shares in CPI basket.
Sources: Central Bank of Chile and National Statistics Institute (INE).
BIS central bankers' speeches
Inflation expectations Average forward inflation compensation
EES and FOS (*) based on swap rates
(moving weekly average, percent)
(percent)
7 7 7 7
6 6 6 6
5 5
5 5
4 4 4 4
3 3
3 3
2 2
2 2
1 1
1 1
06 07 08 09 10 11
06 07 08 09 10 11
FOS one year ahead FOS two years ahead
3 in 2 5 in 5 1 in 1
EES at Dec.11 EES one year ahead
EEE a dos años
(*) The FOS considers the survey of the first half of the month. Only for March, the second half is also
considered.
Source: Central Bank of Chile.
Table 3
Impact on GDP and inflation of a US$10 increase in the oil price (*)
(percentage points)
FMI OCDE Consenso de mercado
PIB Inflación PIB Inflación PIB Inflación
United States -0.6 0.6 -0.3 0.5 -0.35 0.5
Eurozone -0.4 0.2 -0.3 0.5 -0.5 0.4
Japan -0.2 --0.4 0.3 -0.3 0.3
Emerging -0.2 --0.2
-Asia -exc. Japan -0.8 0.7 --0.8 0.7
China -0.8 --0.27 0.46
Latin America -0.2
-World -0.4 --0.4 -
(*) For comparison purposes, the shocks of the respective studies have been adjusted to equal
magnitudes.
Sources: Central Bank of Chile, Deutsche Bank, International Monetary Fund and OECD.
International prices of External price index of foodstuffs
commodity foodstuffs (1) relevant to Chile (2)
monthly index, January 2007 and June 2010=100 (índice, enero 2007=100)
170 170
170 170
160 160
160 160
150 150
150 150
140 140
140 140
130 130
130 130
120 120
120 120
110 110
110 110
100 100
100 100
t t+5 t+10 t+15
07 08 09 10 11
In pesos
January 2007-June 2008
In dollars
June 2010-February 2011
(1) Based on FAO index that uses average prices of monthly transactions in the main markets.
(2) Based on weights of international prices of the various foodstuffs according to shares in CPI basket.
Sources: Central Bank of Chile, Bloomberg, FAO and National Statistics Institute (INE).
Figure 13
Relative prices of foodstuffs Gasoline price in pesos
(index, January 2007=100) (weekly index, 01/01/2007 and 06/07/2010=100)
120 120
135 135
130 130
115 115
125 125
110 110
120 120
105 105
115 115
110 110
100 100
105 105
95 95
100 100
90 90
95 95
t t+16 t+32 t+48 t+64
04 05 06 07 08 09 10 11
2007 2010
CPIX1 foodstuffs/CPIX1
CPIX1 foodstuffs/CPI
CPIX1 foodstuffs/CPIX1 w/o foodstuffs
Sources: Central Bank of Chile, ENAP and National Statistics Institute (INE).
Figure 14
Marginal cost of electric generation (*)
(dollars per MWh)
350
350
300 300
250 250
200 200
150 150
100 100
50 50
0 0
04 05 06 07 08 09 10 11
(*) Alto Jahuel subsystem.
Source: Center for the Economic Charge Delivery (CEDEC) of the Central Interconnected System.
Figure 15
Nominal exchange rate Copper price (*)
(index, 01/02/2006=100) (dollars per pound)
140 140
5 5
130 130
4 4
120 120
110 110
3 3
100 100
2 2
90 90
80 80
1 1
11(f) 12(f)
06 07 08 09 10 11
06 07 08 09 10 11 12 13
OER MER Multilateral dollar
(*) Red dots indicate average copper price forecast for 2011 and 2012 in December 2010's Monetary Policy Report; green dots indicate the same in
March 2011's Report.
Sources: Central Bank of Chile and Bloomberg.
BIS central bankers' speeches
Figure 16
Change in nominal exchange rate with respect to 2008 average (*)
(percent)
25
20
15
10
5
0
-5
-10
-15
-20
U.K.
Peru
Chile
Israel
Japan Brazil
Africa Korea
Russia
Poland
Turkey
Mexico
Canada Norway
Hungary
Malaysia Thailand Republic
Australia
Eurozone
Colombia
Indonesia
N.Zealand
Philippines
Switzerland
South South
Czech
(*) Above zero value indicates an appreciation of the local currency against the U.S. dollar.
Source: Bloomberg.
Figure 17
Real exchange rate (*)
(index, 1986=100)
120 120
110 110
100 100
90 90
80 80
70 70
88 92 96 00 04 08
RER Average, 1991-2010 Average, 1996-2010
(*) Information at 28 March 2011.
Source: Central Bank of Chile.