Rodrigo Vergara: The Monetary Policy Report and the Financial Stability
Report
Presentation by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, before the Finance
Commission of the Honorable Senate of the Republic, Santiago de Chile, 21 December 2015.
* * *
Both Reports can be found at http://www.bcentral.cl/en.
Accompanying figures and tables can be found at the end of the speech.
Introduction
Mr. President of the Finance Commission of the Senate, senator Andrés Zaldívar, senators
members of the Commission, ladies and gentlemen,
I appreciate your invitation to present the vision of the Board of the Central Bank
of Chile on recent macroeconomic and financial developments, the respective
outlook and its implications for monetary and financial policy. This view is
contained in detail in our Monetary Policy Report of December 2015 and in our
Financial Stability Report for the second half of 2015.
In the past few months, annual CPI inflation evolved in line with September's
estimates, although its core component - the CPIEFE - posted a slightly larger
increase, reflecting the further depreciation of the peso in the period, with still
bounded output gaps and within the historical indexing patterns.
GDP growth for the third quarter matched the projections, while domestic
demand was somewhat higher. Thus, the economy continued to grow in the
range of 2 to 2.5 percent.
The external scenario has worsened, due to the drop in the terms of trade,
particularly the price of copper, sluggish growth of our trading partners, and
notso favorable financial conditions. The policy rate increase in the United States
last week is the most significant development of the recent past.
In this context, in the baseline scenario that I will be presenting in a moment,
the growth outlook for 2016 is revised downward and the convergence of
inflation with the target is pushed back somewhat. This results in the September
scenario being intensified, with stronger short-term inflationary pressures that
should ease into the medium term.
With this scenario in mind, in September we estimated that, to ensure the
convergence of inflation with the target, it would be necessary to withdraw part
of the monetary stimulus then in place. We began the process in October and
continued it in December, taking the monetary policy interest rate (MPR) to 3.5
percent.
In the baseline scenario I will describe, we considered measured adjustments
that would be made at a pace that would depend on incoming information and
its implications on the inflation outlook. The monetary policy stance will continue
to be expansionary over the whole length of the projection horizon, in line with
below-potential output growth and inflation declining to 3 percent.
Let me now turn to our baseline scenario and the main risks we have described
in the Reports I am presenting to you today.
Macroeconomic scenario
Last November, the high basis of comparison led annual CPI inflation to 3.9 percent, down
from a few months back. However, both our baseline scenario and the market's projections
expect it to rise again above 4 percent and to stay in the neighborhood for the larger part of
2016.
Our currency's depreciation has been a significant factor behind the increase in inflation,
reflected mainly in the CPIEFE inflation for goods which, after averaging -1.9 percent in 2013,
has been somewhat below 5 percent since July this year. Add to this the indirect effect on
other prices via indexation to past inflation. Aside from the sustained depreciation of the peso,
the persistence of high inflation is also related, as was stressed in September, with the fact
that output gaps, despite some increase, are of a smaller magnitude than they have been in
other low-growth cycles, making it difficult for non-tradable goods inflation to make a bigger
adjustment (figure 1).
The evolution of output gaps is most evident in the labor market, where the unemployment rate
remains low and annual growth of total employment hovers around 2 percent, with salaried
employment showing faster growth at the margin. While nominal wages have had a gradual
moderation since late 2014, they are expanding at about 6 percent annually (figure 2).
Meanwhile, fuel prices have dropped and foodstuffs inflation has slowed. The recent
adjustment of public sector wages should help to contain wage pressures.
Our baseline scenario estimates that GDP will grow by 2.1 percent in 2015, within the range
we foresaw in September. As I said, the performance of the economy in the third quarter was
similar to that of previous quarters, so it continued to grow between 2 and 2.5 percent annually.
This result revealed a deeper than expected decline of natural resources, particularly mining,
due to production downtime associated to the fall in the copper price. The performance of the
other sectors was somewhat better, namely construction and some services.
As for domestic demand, it is still growing weakly, although a little more than we foresaw in
September. The increase in gross fixed capital formation, where specific factors combine, such
as high imports of transport equipment, and stronger residential housing construction, is worth
noting. Private consumption kept a growth rate of around 2 percent annually (figure 3).
The performance of domestic demand reflects that business and consumer confidence
indicators remain pessimistic, despite the resilience of the labor market and that GDP growth,
while slow, has stabilized. The cost of domestic funding is still low by historical standards,
partly reflecting the expansionary stance of monetary policy. Nonetheless, with the sole
exception of mortgage loans, credit growth in real annual terms is still limited (figure 4).
The baseline scenario assumes that GDP will grow between 2 and 3 percent in 2016, a lower
range than forecast in September. This projection continues to estimate that the economy's
potential growth (i.e., the non-accelerating-inflation growth rate) lies around 3 percent.
Accordingly, we believe that output gaps will exhibit limited growth in 2016 and will begin
narrowing towards 2017.
With respect to domestic demand, the persistently low confidence indicators and the
downsized public investment plans for 2016 means lowering the growth forecast for gross fixed
capital formation. Private consumption is also revised downward, in line with low household
expectations and slower than expected non-durable consumption. The labor market has
proved resilient, but we expect it to show some deterioration during 2016. All considered,
consumption should grow in 2016 more than it did this year. The drop in the copper price and
the worsened financing conditions would also discourage investment. About its construction
component, the momentum coming from the upcoming entry into force of the VAT will fade
gradually. Measured as a percentage of GDP, in both nominal and real terms, gross fixed
capital formation will change little from 2015, at 21.9 and 23.5 percent, respectively.
The worsening of the external scenario, as I will detail later, has a significant effect on the
larger current account deficit of 2015 and 2016: 1.7 and 2.6 percent of GDP, respectively (0.7
and 1.5 percent in September). This owes mainly to the decline in the terms of trade. Add a
larger than expected increase in capital goods imports this year, particularly of transport
equipment (table 1).
This projection assumes that fiscal policy will continue to contribute to expenditure growth,
although not so intensely as in 2015. In particular, fiscal spending will evolve in accordance
with the fiscal rule and the consolidation objectives set forth by the Administration, which has
pledged to reduce the structural deficit by about one quarter of a point of GDP per year.
The worsened external scenario relevant for Chile is the main factor behind the downward
revision to 2016 growth. This phenomenon is shared by all emerging and commodity-exporting
economies, mainly because of the substantial drop in the terms of trade and less favorable
external funding conditions.
Commodity prices fell again in recent months, influenced by the steady appreciation of the
dollar and slower global growth. In the case of copper, one must add prospects that the
Chinese economy's recomposition by sectors will continue to erode the demand for the metal.
Thus, at the statistical cutoff date for this Monetary Policy Report, copper was trading at under
210 cents per pound, accumulating a drop of nearly 30 percent in the year. This, combined
with a discouraging short-term outlook, has prompted a significant reduction in our copper price
forecast for 2016 and 2017. We now estimate that it will trade at an average of 225 dollar cents
per pound, compared with the almost 250 cents we anticipated in September.
The price of oil has also dropped in recent months, to less than 40 dollars per barrel as of the
closing of our Monetary Policy Report, around 30 percent with respect to the beginning of the
year. In this case, the global factors that have affected commodity prices are compounded with
supply conditions that have had a major impact on prices over the last year and a half.
Considering all these factors, the outlook for the price of crude oil in the next two years has
been also reduced significantly, to an average of 46 dollars per WTI barrel and 48 dollars the
Brent. In September we were projecting prices of 53 and 58 dollars for the two oils.
For some months now, external financial conditions have been less favorable for the Chilean
economy. The preamble to the US monetary policy rate adjustment caused significant volatility
in financial markets. However, the increase of last week had a cool reaction of the markets. In
Latin America the mix of worsened economic prospects and idiosyncratic factors has fueled
the rise in risk premiums, but in Chile this rise has been smaller (figure 5).
Moreover, the projected growth of our trading partners in the period 2016-2017 has been
downscaled marginally compared to what we expected in September. The developed world,
particularly the United States, shows a sustained recovery. Meanwhile, the emerging world
has slowed further. In China, fears of a deeper slowdown and turmoil in financial markets have
eased, but the Chinese economy has decelerated, with some weakness in the manufacturing
sector. Latin America faces a complex situation, particularly Brazil which is going through its
worst recession in decades. The loss of its investment grade last week reveals the difficulties
of this economy. In Argentina, the new authorities are facing great challenges. Inflation in Latin
America, in contrast with the rest of the world, has increased, limiting the room for looser
monetary policies (table 2).
In our baseline scenario, annual headline inflation stays above 4 percent for most of 2016,
ending the year inside the tolerance range and hitting the target near the end of the projection
horizon, now the fourth quarter of 2017. It is worth saying that inflation expectations remain
anchored to the target over that horizon (figure 6).
This Monetary Policy Report's inflation forecast assumes that, over the policy horizon, output
gaps will widen in the short term but will remain bounded, and the real exchange rate will
appreciate slightly.
The Board already began withdrawing part of the monetary stimulus as announced in
September, taking the MPR to 3.5 percent. The baseline scenario uses as a methodological
assumption that the policy rate trajectory will be as inferred from the various expectations
indicators at the statistical cutoff date for this Report (figure 7). Accordingly, monetary policy
will continue to be expansionary, consistent with a context where growth remains below
potential for some time and inflation converges with the target within the projection horizon.
Thus, the monetary policy rate in real terms will stay near zero for quite a while, placing itself
as one of the most expansionary in the group of emerging economies (figure 8).
The baseline scenario reflects those events believed to be the most likely to occur with the
information at hand at the closing of the Reports. There are risks, however, that, if materialized,
could reshape the macroeconomic outlook and thus alter the course of monetary policy.
About the external scenario, it is still early to know how the policy rate increase in the United
States will affect the global economy. A first look shows that the markets have taken it calmly,
stock prices rose and the dollar lost some value against the other currencies. Of course the
way this process will unfold is an important source of risk, especially because of existing
differences between what market expectations suggest and Fed's statement about how fast
and how far it will raise the rate. Plus there is divergence in the monetary policy among the
developed countries and its potential effects on the global value of the dollar. To the extent
that this continues, the pressures for a more appreciated dollar will persist, affecting commodity
prices and our own currency.
In China, an abrupt adjustment is now less likely, but doubts remain about how its economy
will contribute to the recovery of global activity and commodity prices, especially now that they
are rebalancing growth toward consumption and services. Finally, the complex situation in
Brazil and the need for further tightening in some Latin American economies continue to pose
a major risk. A worsening of the economic outlook in the region would affect external demand
and possibly financing conditions facing Chile.
If any of these risks comes true, it is quite possible that the reaction of the exchange rate will
push inflation up in the short term, although its medium-term effects are less obvious,
considering that activity will probably suffer too.
At home, inflation has remained high for quite some time, which could affect the velocity of its
convergence, because of both its effects through indexation and the formation of expectations.
All in a context where margins are still bounded and capacity gaps are small. Meanwhile, the
drop in the oil price and the reduced external inflation might take some steam off inflationary
pressures.
Into the medium term, there are risks that could result in activity performing worse than
assumed in our baseline scenario, widening capacity gaps and easing inflationary pressures.
On one hand, although the labor market has remained resilient, a significant adjustment that
may slow down wage growth, increase unemployment and affect expenditure cannot be ruled
out. Confidence may not recover as expected, driving the economy to grow less. In any case,
we do not rule out either that the economy could grow more than forecast, if confidence
indicators recover more rapidly. This could also occur if the drop in fuel prices has a greater
impact on our national income.
After assessing these risks, we estimate that the balance of risks is unbiased for inflation and
downward biased for output.
Now let me turn to our Financial Stability Report (IEF).
The Financial Stability Report
Our Financial Stability Report discloses, twice every year (in June and December), the recent
macroeconomic and financial developments that could affect the financial stability of the
Chilean economy.
Events abroad are also important in terms of their implications for financial stability and, as I
said, the external conditions facing Chile have deteriorated throughout the second half of the
year. For one thing, the downturn of the Brazilian economy has taken its toll on the valuation
of Chilean firms' investments there. In addition, the first policy rate hike in the United States
might trigger a decompression of risk premiums, including the term premiums of foreign
interest rates, causing exchange rate fluctuations and increasing domestic long-term interest
rates.
About our local economy, the Report underscores the low level of both short-term and
longterm interest rates. In this scenario, please note that the volumes managed in mutual debt
funds remain high, which could be reversed in case of an abrupt event of increases in long
rates. This risk scenario couples with the reduced relative liquidity of the instruments that make
up these portfolios.
We have been insistent in the last few Reports about the financial situation of local firms. Our
examination of incoming data reveals a weakening of the sector. On one hand, the debt to
GDP ratio, which hovered near 114 percent since the end of 2014, rose to 121 percent in the
third quarter of 2015. Although a large part of this increase results from the valuation effect
deriving from the peso depreciation, its level is high from a historical perspective. Moreover,
the increase accumulated in the past seven years is high by emerging economies' standards
(figure 9). On the other hand, although the financial indicators of SVS-listed firms have not
changed much since our last Report, debt is high and profitability is low, historically (figure 10).
Anyway, various indicators show that the balance sheet exposure of these firms to exchange
rate risks has remained low.
Turning to the real-estate sector, housing sales remain dynamic and prices are on an upward
trend, albeit with some moderation lately (figure 11). Advance purchases associated with the
upcoming tax reform explain the strength of the sector to an important extent. Actually, most
of the properties sold are either off-plan or in construction phase. The low interest rates on
mortgage loans also explain part of this dynamism. The growth in housing prices has been
reflected in the dynamics of mortgage loans, which are rising nearly 10 percent annually in real
terms, due mainly to an increase in the average debt and, to a lesser extent, to an increase in
the number of debtors. Notably, although many lending indicators remain stable, such as the
loan to value ratio and the debt to income ratio, the share of households with more than one
mortgage has increased: from 20 to 25 percent in the last five years.
As for office space, the vacancy rate continues to grow. It is worth noting that the new square
meters available have been reflected in more vacant office space, at more than 10 percent
now. Therefore, the rents have dropped, a tendency that is expected to continue in the coming
quarters (figure 12).
About the financial situation of households, aggregate indicators (i.e. borrowing and financial
burden) show slight changes lately. At June 2015, household debt amounted to 61.6 percent
of income, 0.8 percentage points more than at end-of-2014, remaining on an upward trend.
The financial burden remained stable, closing at 14.7 percent. The latest Survey of Household
Finances showed an increase in the financial burden of medium- to upper-income households
with respect to 2011 (figure 13).
This occurs in a context where household default indicators remain stable. However, credits
from family clearing houses (which represent a low fraction of household debt, at 3.4 percent)
continue to increase nonperformance. This situation, coupled with flawed management, drove
one of these institutions to default on its financial and social commitments, triggering
intervention by the supervising entity and starting a restructuring process. These events
motivated an increase in the premiums on the debt issued by these institutions, but their effects
on the rest of the financial system have been limited. Still, we believe that steps must be taken
to boost the convergence of the supervision models of these houses, among others, in order
to enhance their corporate governance and their credit risk management, to reduce the
probability of new instability episodes.
In the banking system, credit activity is growing moderately, except for mortgage loans.
Corporate and consumer loans continue to grow slowly. On one hand, the slowdown of the
commercial portfolio is consistent with the economy's cycle, which coincides with the reduction
in demand revealed by the Bank Credit Surveys of the past few months. On the other hand,
the consumer portfolio shows zero growth in the lower amount segments, usually associated
with lower-income debtors. In the mortgage category, the greater expansion of debt comes
from loans of more than five thousand UF, partly explained by the housing price dynamics.
Bank financial indicators show the sector losing strength. At the third quarter of 2015, ROE
dropped to 15 percent, largely because of reduced interest rate spreads. This reflects the shift
in portfolio composition from higher-yield segments (consumer and commercial) to mortgage.
The capital adequacy ratio (CAR) continued to decline, to slightly below 13 percent as of
August 2015, consolidating a fall of just over one percentage point in the last four years (figure
14). This has occurred in a context where international banks have tended to increase their
capitalization levels to strengthen their capacity to respond to episodes of financial stress, in
line with the new international regulations (Basel III), or as a voluntary way of building
resilience. Although Chile, with capitalization levels of around 14.3 percent in 2009, was around
the median of OECD economies, its place today is in the lower part of the distribution (figure
15).
In view of these developments and considering that the amendments to the General Banking
Law announced this year by the Ministry of Finance will include a review of the solvency
requirements, making them gradually converge to the new Basel III capital standards, it is
important that the banks strengthen their capital levels, for example by adjusting their profit
reinvestment policies.
The stress tests that we perform for each Financial Stability Report indicate that our capital
levels are adequate to absorb the occurrence of a severe stress scenario. This scenario has
similar characteristics to the one evaluated in the previous FSR, as it considers a fall in GDP
in the short term and slower growth in the medium term. Output would stand at -4.5 percent
annually during the most critical quarter and would then converge to a growth rate of
1.4 percent by the end of 2017. This is intended to replicate past financial fragility episodes of
importance.
The results of these stress tests show that the banking system's position is adequate to deal
with a severe stress scenario. They mark a downturn from the past FSR, mainly because of a
lower level of initial capitalization and profitability, affected by reduced operating margins
consistent with the evolution of the business cycle (figure 16).
Let me close with some final thoughts.
Final thoughts
The economic situation has become more complex, especially in emerging markets. The terms
of trade have fallen more than expected and financial conditions have tightened. In addition,
despite that the economic recovery of developed countries has consolidated, the situation in
some key emerging trading partners has worsened.
The difficulties now facing emerging economies stem from the major changes observed in the
global economy, especially the end of the commodity price boom. One must recognize,
however, that the impact of these changes on each economy hinges on how well each one
prepared to face them during the good years. Many countries incubated weaknesses that are
now hampering their adjustment processes: high current-account deficits, fiscal mismatches
and increased corporate debt - part of which is denominated in foreign currency and not
properly hedged - , are some of the elements that make the adjustment more complex and
risky.
Of course, there are also strengths. In particular, many emerging economies and countries in
the region have better monetary policy frameworks in place to confront these challenges.
Independent central banks with clearly defined objectives, flexible exchange rates, and an
appropriate level of reserves, are key lines of defense.
Chile stands out in these issues. Our net public debt is nearly zero, because we saved during
the copper price bonanza. Our financial system is a well regulated one and shows no
significant weaknesses. The actions of the Central Bank have provided room for a significant
adjustment of relative prices and, although at the expense of higher inflation, expectations
have remained well anchored, a clear signal of the market credibility of our commitment to
keep inflation low and stable.
But we must not be self-complacent. Quite the opposite: we must strengthen these elements
that have traditionally been our main lines of defense against shocks from abroad.
Within this framework, our Financial Stability Report shows that it is highly necessary for the
private sector to maintain a strong financial position in order to confront tougher conditions.
Therefore, both the fragility we detect in the firms' financial situation and the reduced
capitalization of banks are elements that must be monitored carefully, even if at this moment
they are not problems by themselves.
And about fiscal policy, the effort that the government and Congress have set for 2016 is most
appreciated, i.e. substantially slowing down spending growth, in line with the reduction in
income associated with the lower copper price and slower economic growth. More importantly,
we see it as recognition of the need for a fiscal consolidation process that takes into account
the budget constraints that this more complex macro scenario will bring in the near future.
With respect to monetary policy, our policy framework plays a fundamental role in smoothing
the business cycle. The basic idea is that if fiscal policy is methodical and predictable, in line
with the fiscal rule, it provides greater space for a countercyclical monetary policy. In this
sense, the first line of defense when facing shocks is monetary policy. That is precisely the
role that we have played these years, in which we lowered the policy rate, helping to contain
the drop in demand and allowing the peso to depreciate.
But monetary policy has its limits too, which we must respect if we do not want this essential
pillar of price stability to weaken. This is why, after having higher and more persistent inflation
levels than we had foreseen, we have decided to withdraw part of the monetary impulse, with
the objective of bringing inflation to the target within a two-year horizon. Monetary policy will
remain expansionary, with the real rate below its neutral level for a prolonged period of time.
With that, we are certain that we will continue to contribute to the recovery of growth and hold
unemployment within boundaries. But, at the same time, we will also ensure the achievement
of price stability.
I would like to conclude by emphasizing that, despite the pessimistic atmosphere associated
with the developments in the world economy, plus the cases of collusion and other legal issues
and, I will say it, the stress that has pervaded some important local discussions, from a macro
standpoint the conditions to resume strong growth are present. However, we must be ready to
confront a more complex scenario. This means that every aspect that I have mentioned has to
improve. As for monetary policy and our role as financial regulator, we will continue to work to
pursue the objectives that we have been entrusted, namely to safeguard price stability and
ensure the normal functioning of internal and external payments.
Thank you.
Figure 1
Inflation indicators (*)
(annual change, percent)
8 8
6 Services EFE 6
4 4
CPI
2 2
CPIEFE
0 0
Good EFE
-2 -2
-4 -4
-6 -6
11 Jul. 12 Jul. 13 Jul. 14 Jul. 15 Jul.
(*) As from January 2014, the new indexes with annual base 2013=100 are used, so they are not strictly comparable with
earlier figures.
Sources: Central Bank of Chile and National Statistics Institute (INE).
Figure 2
Labor market
(percent; annual change, percent)
12 12
Unemployment rate(1)
10 10
8 8
Wages (2)
6 6
4 4
Employment (1)
2 2
0 0
-2 -2
00 05 10 15
(1) Spliced series using monthly variation in February 2010.
(2) For nominal wages, average ULC and IREM were used. Spliced series using monthly variation in February 2010.
Sources: Central Bank of Chile and National Statistics Institute (INE).
Figure 3
GDP, domestic demand and components
(annual change, percent)
9 21
Domestic demand
6 14
Consumption
GDP
3 7
0 0
Gross fixed capital
-3 -7
formation (right
axis)
-6 -14
12 13 14 15
Source: Central Bank of Chile.
Table 1
Domestic scenario
(annual change, percent)
2013 2014 2015 (f) 2016 (f) 2016 (f)
Jun.15 Sep.15 Dec.15 Sep.15 Dec.15
MP Report MP Report MP Report MP Report MP Report
GDP 4.2 1.9 2,25-3,25 2,0-2,5 2.1 2,5-3,5 2,0-3,0
Domestic demand 3.7 -0.6 2.6 2.0 2.3 3.1 2.6
Domestic demand (w/o inventory change) 4.6 0.5 2.2 1.4 2.0 3.0 2.5
Gross fixed capital formation 2.1 -6.1 0.7 -1.2 0.7 1.9 1.7
Total consumption 5.5 2.5 2.7 2.1 2.4 3.3 2.7
Goods and services exports 3.4 0.7 1.3 -1.7 -1.7 1.2 1.0
Goods and services imports 1.7 -7.0 1.1 -2.3 -1.4 2.2 1.6
Current account (% of GDP) -3.7 -1.2 -0.4 -0.7 -1.7 -1.5 -2.6
Gross national savings (% of GDP) 20.6 20.3 21.0 20.8 20.0 20.0 19.1
Nominal gross fixed capital formation (% of GDP) 23.8 22.0 21.6 21.5 22.0 21.5 21.9
(f) Forecast.
Source: Central Bank of Chile.
Figure 4
Lending interest rates (1) (2)
(percent)
18 40
12 30
6 20
0 10
02 04 06 08 10 12 14
(1) Weighted average rates for all operations performed each month.
(2) Dashed horizontal lines show ten-year average for each series.
(3) Interest rates on credits in UFs.
Source: Central Bank of Chile based on SBIF data.
Figure 5
Sovereign risk premiums in emerging economies (1) (2)
(basis points)
Latin
300 300
America (3)
250 250
Europe (4)
200 200
150 150
Asia (5)
100 100
Chile
50 50
13 14 15
(1) The dotted vertical line marks the statistical cutoff date for the September 2015 MP Report.
(2) Measured by 5-year CDS premiums. Simple average of countries in each region. (3) Includes Brazil, Colombia, Mexico,
Panama and Peru. (4) Includes Bulgaria, Croatia, the Czech Republic, Hungary and Turkey. (5) Includes China, Indonesia,
Malaysia, the Philippines and Thailand.
Source: Bloomberg.
Table 2
International baseline scenario assumptions
2014 2015 (f) 2016 (f) 2017 (f)
Jun.15 Sep.15 Dec.15 Jun.15 Sep.15 Dec.15 Sep.15 Dec.15
MP MP MP MP MP MP MP MP
Report Report Report Report Report Report Report Report
Growth (annual change, percent)
Trading partners' GDP 3.4 3.3 3.1 3.0 3.7 3.4 3.2 3.4 3.3
World GDP at PPP 3.4 3.4 3.2 3.1 3.7 3.5 3.4 3.5 3.5
United States 2.4 2.5 2.4 2.4 2.9 2.8 2.6 2.8 2.8
Eurozone 0.9 1.5 1.5 1.5 2.0 1.9 1.7 1.9 1.8
Japan -0.1 1.0 1.0 0.6 1.4 1.4 1.2 0.5 0.5
China 7.3 6.9 6.7 6.9 6.5 6.4 6.4 6.1 6.1
India 7.3 7.5 7.5 7.5 7.8 7.8 7.8 7.5 7.5
Rest of Asia (Excl. Japan, China and India) 4.0 4.2 3.7 3.4 4.5 4.0 3.7 4.2 4.0
Latin America (excl. Chile) 1.0 0.2 -0.1 -0.6 1.8 1.0 0.4 1.4 1.5
(levels)
LME copper price (US$cent/lb) 311 280 255 249 290 245 220 250 230
Oil price (Brent y WTI avg) (US$/barrel) 96 60 52 51 67 53 44 58 50
(annual change, percent)
Terms of trade -1.4 1.3 -3.0 -4.2 -0.2 -1.0 -3.8 -0.4 1.7
(f) Forecast.
Sources: Central Bank of Chile, based on a sample of investment banks, Bloomberg, Consensus Forecasts, the IMF and statistics bureaus of respective countries.
Figure 6
CPI inflation (*) CPIEFE inflation (*)
(annual change, percent) (annual change, percent)
6 6
6 6
5 5
5 5
4 4
4 4
3 3 3 3
2 2
2 2
1 1
1 1
0 0
0 0
11 12 13 14 15 16 17
11 12 13 14 15 16 17
Dec.2015 MP Report
Sep.2015 MP Report
(*) Gray area shows forecast, as from the fourth quarter of 2015.
Sources: Central Bank of Chile and National Statistics Institute (INE).
11
BIS central bankers' speeches
Figure 7
MPR and expectations
(percent)
6 6
5 5
Financial asset prices, December MP Report(*)
4 MPR 4
9
3 3
EES, December 2015
FBS, first half December 2015
2 2
11 12 13 14 15 16 17
(*) Built using swap contract interest rates up to 10 years.
Source: Central Bank of Chile.
Figure8
Real MPR (*)
(9ercent)
8 8
Brazil
6 6
Indonesia
4 4
Peru
Colombia
2 2
New Zealand
Mexico
South Africa
0 0
Chile
Australia
-2 -2
(*) Calculated as the current MPR minus inflation expected at December 2016.
Sources: Central Bank of Chile and central banks of respective countries.
Figure 9
Total corporate debt (*)
(percent of GDP)
125 125
External Debt
Local Debt
100 100
75 75
50 50
25 25
0 0
09 10 11 12 13 14 15 III
(*) Excludes banks. Based on firm-level administrative information.
Source: Central Bank of Chile based on Achef, SBIF and SVS data.
Figure 10
Corporate financial indicators (1)
(percent; times)
12 0,8
Indebtedness (right axis) (3)
9 0,6
6 0,4
Profitability (2)
3 0,2
0 0,0
95 97 99 01 03 05 07 09 11 13 15
(1) Data at December of each year, except 2015 which us