José De Gregorio: The world economy, foreign exchange tensions, and
recent monetary policy making in Chile
Keynote address by Mr José De Gregorio, Governor of the Central Bank of Chile, at the
Monetary Club of Universidad Finis Terrae, Santiago, 20 May 2011.
* * *
Abstract
This presentation discusses risks and tensions that have emerged in the global economy due
to the ongoing process of world economic recovery and its implications on the Chilean
economy. It reviews the decoupling of emerging economies from developed ones in terms of
growth, the difficulties endured by developed economies to boost their feeble recovery,
Europe's public debt issues, the high commodity prices and symptoms of overheating in
some emerging markets. This scenario has pushed emerging economies' exchange rates to
their lowest levels of the past decade. It stands out that, although an important step to
change the composition of world demand, it has created tensions and in some cases has
prompted the adoption of policies to mitigate exchange rate adjustments. Capital inflows
have added pressure to the exchange rate discussion in some emerging economies and
might favor an unhealthy increase in lending and incubate financial fragilities. Chile's last
forex intervention is mentioned. The differences in capital flows between Chile and other
countries and episodes of substantial flows into emerging economies are described,
emphasizing that large capital outflows from Chile have created a negative net balance. It is
also suggested that the current level of the neutral MPR is probably lower than previous
estimates, influenced by the low international interest rates.
Thank you for inviting me to present at the Monetary Club of Universidad Finis Terrae. This is
a good opportunity to review some recent developments in the Chilean economy, in
particular the behavior of the exchange rate, the forex intervention under way, and our
monetary policy decisions. But before diving into these issues, let me take a look at some
important elements shaping the international scenario, which is where the main risks and
tensions facing our economy originated.
The international economy
The global economy is leaving the Great Recession behind. Its recovery, however, has been
heterogeneous and is subject to risks. The developed world still hasn't fully overcome the
negative effects of the crisis, while emerging markets are currently in a strong growth path.
Despite they did not commit the excesses of their advanced counterparts; they suffered the
effects of the crisis. Overall, the magnitude of the impact on growth in emerging economies
was milder than it could have been expected based on recent history, and emerging
economies were even able to recover quickly and strongly (figure 1).
The good performance of emerging economies is grounded on their macroeconomic policy
schemes. These have evolved and improved over time, partly because lessons have been
learned from numerous previous shocks, which originated in macroeconomic and financial
imbalances. These schemes pursue low, stable inflation, healthy public finances, strong and
well regulated financial systems and realistic exchange rates. Of course policies vary from
one country to another, but their basic principles are shared. In Chile, a fiscal policy that
saves during good times, an autonomous central bank that conducts monetary policy under
an inflation targeting regime and a floating exchange rate, were key elements to successfully
work its way out of the crisis. Furthermore, the country has a solid, well regulated financial
system that does not allow for many of the operations that dragged some economies to their
troubled present-day situation. A traditional banking model dominates the banking industry,
where a strong base of deposits, both personal and institutional, permits to finance mainly
credits.
Before the crisis, a lot was said about the decoupling of emerging economies' growth path
from that of developed countries. This idea, which gained momentum in 2007 and 2008, was
seriously questioned during the disaster because, as I said, no one was spared its effects. In
hindsight, however, we can say that there actually was a decoupling. It is true that in a
globalized world commercial and financial intertwining does not allow the economies to
isolate themselves from the global cycle, but the performance of emerging markets is living
proof that mitigating the negative consequences from the external cycle can be done. In fact,
it is hard to find another episode where the developed world suffered a severe recession that
was not magnified in developing countries. This is especially relevant in Latin America
(figure 2).
The developed economies face a different scenario. They are having important doubts about
whether their fiscal situation will be sustainable. Large expansions of fiscal expenditure
before the crisis and the implementation of unprecedented stimulus packages to cope with it
threw their debt levels very high. Today they have no further room to continue increasing
public spending and, even worse, they need to make substantial adjustments that are difficult
to implement in such a weak economic situation. The cases of the United States and Japan
are good examples. Add to this what is happening in peripheral European economies, the
adjustments that are needed and the financial tensions this creates. What the founders of the
euro had in mind early on was that the economies in Europe, particularly in the south, would
adopt sound macroeconomic policies following in the steps of Germany. Nonetheless, it
seems that some economies, such as Greece, only took advantage of the low risk premiums,
over-borrowing and creating a deficit way bigger than set forth in the Stability and Growth
Pact. The consequence was extreme financial vulnerability that is proving very difficult to
resolve today.
For the time being, risks seem to be well contained, but the lack of credibility of the markets
has resulted in some agents speculating with the possibility of some member country being
discharged from the Eurozone. This seems implausible, as it would trigger a major financial
crisis, a risk that policy makers in Europe are certainly aware of. It can be discussed at length
if it was a good idea to let one or another country in, but once officially a member and in a
situation as frail as it is today, the decision becomes irreversible.
At any rate, public debt troubles in Europe are quite complex and call for a global, permanent
solution. According to the forecasts contained in the third review of Greece's stand-by
agreement with the IMF, from now to 2020 Greece must generate a primary fiscal surplus of
6% of GDP per year. Thus it could take its public debt from its present-day levels of around
1.5 times its GDP to 1.3 times. This is a major adjustment if we consider that in 2008 the
country posted a primary deficit of 4.5% of GDP, all this under the assumption that it will pay
an interest rate between 6 and 7%, and the interest rate is today around 16%. Certainly, if
the rates don't go down it will be hard for Greece to recover easy access to private credit
markets, as hard as obtaining permanent funding by official agencies. From these
crossroads, Greece will have to find new permanent solutions that allow it to return to fiscal
solvency and distribute the losses without jeopardizing financial stability.
Another complex aspect of the situation of developed economies is their weak recovery.
Although their financial systems and economic activity have begun picking up, they have
been unable to significantly reduce their high unemployment rates and their large output
gaps (figure 3). In addition, growth prospects are poor and, as we have seen in recent
weeks, each piece of information that is disclosed may put substantial volatility on the
market's evaluation of the strength of the economic recovery.
Furthermore, their financial fragility hinders the possibility of a strong come back. The
financial situation of households and governments is complex because of their high degree
of indebtedness. Therefore, it is unlikely that their domestic demands will become a source of
output expansion. Thus, the basis for faster growth lies, for now, on the demand from the rest
of the world. Their weak currencies are consistent with this. In this scenario, another paradox
arises. Germany, the strongest economy in the European Union, whose example the
peripheral countries should follow, has been one of the biggest winners in this conjuncture.
Its fiscal rigor and productive strength as one of the world's greatest suppliers of capital
goods have been boosted by a relatively weak euro. If Germany did not share the common
currency, the Deutschmark would be without a doubt the strongest in the world, quite above
the equivalent of 1.4 US dollars per euro. Belonging to a fragile monetary union has given it
the benefits of a relatively weak currency, which has been an important factor of its fast
expansion.
To blend more ingredients into the world economic cocktail, again we face a substantial
increase in commodity prices. As usual, it can be attributed to various factors. One is the fast
growth of emerging economies and the subsequent increase in demand. Add to this, among
others, climate elements that have hindered the production of foods, and geopolitical risks
that have pushed up the oil price. These high prices, combined with the fact that emerging
economies are near their potential growth level, some with clear signs of overheating, both
actual and expected inflation have risen all over the world. Several emerging economies,
Chile among them, have withdrawn monetary stimulus as a response to this cycle. In
contrast, developed economies, with a timid recovery, have not only sustained their ongoing
monetary packages but are expected to keep them in place for a while. This mixture of
monetary policy imbalances, high commodity prices, and good growth prospects in emerging
economies have created tensions in exchange rates and capital flows, two issues I will refer
to now.
The exchange rate and capital flows
Before the financial crisis hit, some developed economies, particularly the United States,
were accumulating big deficits in their current accounts. This excess spending was being
financed by surpluses in emerging markets, primarily China with its high saving rates, and
oil-exporting economies (figure 4).
Global imbalances were an important factor in the crisis. This was not uncommon for
emerging economies: low saving rates, large current-account deficits and borrowing used to
finance unsustainable consumption or fiscal expansions. This time around, the US strongly
increased fiscal expenditure and borrowing, which was used to finance the purchase of
overpriced housing. As we now know, and warned insistently before the crisis burst, this mix
was bound to lead to severe adjustments, sooner or later.
High terms of trade, capital inflows and growth rates have resulted in exchange rate
appreciations in most emerging and oil-exporting economies (figure 5). In real terms, the
current level of the exchange rate is at its lowest in the past decade in most emerging
economies (figure 6). Vigorous economic growth in these economies means also strong
currencies, while the opposite is true in developed countries.
As I said before, the high indebtedness of developed economies holds back domestic
demand growth. Meanwhile, in emerging economies domestic demand growth is thwarted by
constraints in domestic supply, which require redirecting purchases towards imported goods.
The adjustment of the global economy calls for a change in demand composition, and the
exchange rate adjustments works in that direction. It is logical to expect that once the
developed economies recover their strength, their currencies will follow suit. The transition
may take some time, however. Although the adjustment is good for the world economy, it
entails tensions that may require exceptional policies.
Thus, several emerging economies, Chile included, have taken action to moderate the
exchange rate adjustment. However, due to the forces that underlie it, it is evident that this
trend can be mitigated but not reversed by just a unilateral measure. In January, the CBC
launched a substantial process of reserve hoarding, by announcing the purchase of 12 billion
dollars, the equivalent of around 5 points of GDP, the largest since the mid-1990s (figure 7).
This intervention is sterilized, that is, the pesos issued to buy the dollars are withdrawn
through debt issuance. Not doing this would mean that the increase in liquidity would be
inconsistent with monetary policy, which would then be oriented to a forex objective and
would divert away from its inflation target. I don't need to explain why this would be terribly
damaging to our economy.
The purpose of the intervention is twofold. On the one hand, it allows having more reserves
which, despite their costs, are a good hedge against sharp movements in capital flows.
Although most economies did not significantly deplete their reserves during the crisis, their
sole existence prevents destabilizing capital movements from occurring. On the other hand,
the forex intervention mitigates exchange rate adjustments. As we have said before, without
the intervention the peso would have appreciated further. Still, it is worth pointing out that the
appreciation of the Chilean peso is not so different from that of the currencies of a large
group of emerging or commodity-exporting economies, whether they have intervened their
exchange rates or not.
Let me insist that the forex intervention has only transitory effects. It cannot permanently
modify an economy's competitive position. This can only be made with policies that affect the
real side of the economy. Monetary or forex measures can only have a temporary influence.
The impact of a sterilized exchange rate intervention occurs via the currency portfolio
composition. Because external and internal financial assets are not perfect substitutes,
changes in their relative supply have an initial effect on prices, which then fades over time.
The IMF's latest Regional Economic Outlook for the Western Hemisphere presents estimates
showing that interventions reduce the rate of currency appreciation. Additionally, it indicates
that the effects are milder in more financially open economies, and shows that rule-based or
discretional interventions have similar effects. Ours is rule-based, in order not to lose control
over our monetary policy. As proven by this evidence, the effects would not be so different if
our intervention had been arbitrary. This comes as no surprise, since the effects depend on
both the amount of the intervention and the composition of the currency portfolios.
It has called the attention of many people that a measure similar to that of 2008 has caused
a different behavior of the exchange rate. I don't need to say that the combination of events
has also been different, especially abroad. Back then the world economy was headed to a
severe crisis and risk aversion was growing. This eroded asset value in emerging economies
and strengthened the dollar. Copper prices and terms of trade began to decline. Today the
picture is quite different: the dollar is weaker than ever and the copper price has remained
very high, and is forecast to stay near its present levels for some time (figure 8).
Another issue regarding exchange rate's discussion has to do with the effects of capital
flows. Several emerging economies have seen their capital inflows increasing, which has
added pressure on their currencies. It is worth noting, however, that this phenomenon is not
generalized, because current-account deficits have remained fairly bounded. In the overall
group of emerging economies, capital inflows are today close to where they were during
mid1990s, and certainly below the levels of 2006-2008. However, outflows from these
economies largely exceed those of the 1990s, resulting in a near-zero net balance (figure 9).
Chile is not so different, with even negative net balances (figure 10). Besides, the structural
conditions of our economy and the policy framework are not those of the 1990s. For
instance, interest rates paid on indexed Central Bank instruments are now less than half
(figure 11). The opportunity of high short-term returns, that are normally associated with
massive flows of this kind of capital, is probably not so obvious anymore in our economy.
The possibility that increased capital flows may stimulate unhealthy growth in lending is
another cause for concern. The data do not show for the moment that credit is growing fast.
It is actually on a flatter slope than it was in the 1990s and that of other emerging economies
that have adopted measures to control capital inflows (figure 12). Still, it is important to be on
the watch for excess flows that might incubate financial fragilities and exacerbate economic
cycles, in which case it could be necessary to review financial regulations in place to avert
any costly imbalances.
Recent monetary policy decisions
The scenario outlined in the latest Monetary Policy Report assumes that in the coming
quarters the Chilean economy will grow in line with its potential. This will allow trend inflation,
today in bounded levels, to converge and remain around the 3% target in the coming
quarters. To achieve this objective, we have withdrawn some monetary stimulus, bringing the
monetary policy interest rate (MPR) closer to the neutral range.
Although this is the baseline scenario, the Report also indicated that inflation (and growth)
risks were biased upward. For inflation, arguments were based on the combination of
adverse supply shocks in energy and foodstuffs, the closing of output gaps and the strong
dynamism of the domestic demand.
Some of the aforesaid risks have eased. Private inflation expectations have moderated,
consistently with MPR adjustments and the recent decline in oil prices and other
commodities (figure 13). Anyway, commodity markets remain volatile, so it is premature to
evaluate at what level international prices will settle. Nor can we rule out that the
passthrough of previous rises in world prices to domestic ones, especially for foodstuffs, may
continue.
Other risks have not changed materially. Incoming news confirm a scenario of very dynamic
domestic demand, particularly for consumption, and employment (figure 14). Also wage
growth has speeded up and credit is recovering fast. The domestic economy is growing
strongly and output gaps are closed. Nonetheless, it is still early to predict an overheating.
Actually, the various core inflation measures are still below 3% (figure 15). Output is near full
capacity and, mirroring the rest of emerging economies, excess domestic demand is being
redirected to imports. The current account still shows a surplus, largely because of good
export prices, but also because of steadily increasing volume sales abroad. Furthermore,
monetary policy works with a lag, so it is likely that the full effects of the 450-basis-point
increase in the MPR since June of last year will not be seen for some time. The information
we will be getting in the coming months will give us a better sense of the magnitude of these
effects.
Overall, the negative implications of these risks materializing led us to speed up the pace of
monetary policy normalization in the past few months. Last week we actually raised the MPR
by 50 basis points to 5%. Although the median of market expectations was foreseeing a
somewhat smaller increase, we acted preventively to hold down the dynamism of domestic
demand and the propagation of adverse supply shocks. Now that the MPR is at 5%, it is
approaching the range that has historically been thought of as neutral. Still, a high degree of
uncertainty surrounds the true neutral interest rate.
There are many definitions and methodologies to determine what would be the interest rate
consistent with inflation being at the target and the economy operating at full capacity.
Although this is not the moment to get involved in a lengthy discussion over the level of the
neutral rate, I think some observations are in order. On the one hand, the neutral rate is not a
fixed number. It changes with the state of the economy and can even fluctuate in the short
run. On the other hand, in an open economy the neutral interest rate depends not only on
domestic factors such as the long-term growth rate, but also on external variables. The world
is going through a period of low interest rates and in the short term the neutral interest rate is
likely to be somewhat below previous estimates (figure 16).
I also want to point out that the objective of monetary policy conduct is not to attain a neutral
rate, whatever its level is. The monetary policy interest rate (MPR) fluctuates around this
neutral rate in order for the monetary impulse to be consistent with achieving the target.
Accordingly, just as there are periods during which the MPR is below the neutral level, there
are times when it is above. This is consistent with economic activity fluctuating around its full
capacity level, going from periods of capacity under-utilization to periods of over-utilization.
So the maximum level the MPR will ultimately reach and when this will happen in the current
cycle is something the CBC Board will be analyzing as events unfold.
This year to date, a 200 basis point increase has already accumulated in the MPR and we
believe further increases will be needed. The magnitude and timing of these increases will
respond to incoming data, risks and their implications for inflationary prospects, taking into
account the lags that are inherent to monetary policy. Thus, no scenario can be ruled out. It
is likely that in the coming meetings the magnitude of the correction will be reduced and
there may even be pauses. Likewise, although today it seems less likely, it can also happen
that the recent pace is maintained if inflationary risks so recommend. In any case, there
seems to be consensus in market expectations that smaller adjustments will be required
going forward. Actually, most forecasts place the MPR around 6% at the end of this year
(figure 17).
Conclusions
The last several years have been very complex. Policy makers have faced probably the
greatest challenges in decades. Swings in economic activity, inflation and expectations,
among many other variables, have been marked in unprecedented ways.
Chile's macroeconomic policy framework has given proof of its flexibility and effectiveness,
succeeding in mitigating and overcoming the effects of the world crisis. Today we face new,
significant challenges. The economy must continue on a growth path consistent with its
capacity, while the inflation trend must be aligned with the target. Moreover, the asymmetric
pace of growth between the developed and emerging economies brings along exchange rate
tensions that subject us to new trials.
We face a complex scenario. Inflation has proceeded in line with the target, although, as we
have been saying, it may cross over the upper bound of our tolerance range because of the
strength of the world price hikes for oil and foodstuffs.
It is important to limit the unwanted propagation of these shocks to other prices. Accordingly,
the Bank has quickly come to the scene, making sure that no inflationary pressures incubate
that might compromise the fulfillment of the objective of low, stable inflation. We have
withdrawn the strong impulse that monetary policy brought in 2009-2010. We estimate that
the MPR will have to be raised further in the coming months, but by how much and exactly
when will depend on the implications of incoming data, without ruling out any scenario
a priori. As always, the Board will guide its decisions to ensure that inflation remains low and
stable, which is the best contribution that the Central Bank of Chile can make to the country's
development.
Thank you.
Figure 1
Quarterly economic growth (1)
(q-o-q change, percent)
3 3
2 2
1 1
0 0
-1 -1
-2 -2
-3 -3
07 III.07 08 III.08 09 III.09 10 III.10
Developed (2) Emerging (3)
(1) Regions weighted at PPP. (2) Includes: Australia, Canada, Denmark, the Eurozone, Japan, New Zealand, the Sweden,
Switzerland, the U.K., and the U.S. (3) Includes Argentina, Brazil, Bulgaria, Chile, China, Colombia, the Czech Republic,
Hong Kong, India, Indonesia, Malaysia, Mexico, Peru, the Philippines, South Korea, Russia, Singapore, South Africa,
Thailand, Taiwan, Turkey and Venezuela.
Sources: Central Bank of Chile based on each country's statistics institute and International Monetary Fund.
Figure 2
World growth (*)
(y-o-y change, percent)
15 15
12
129630
-3 9630-3
-6 -6
-9 -9
-12 -12
-15 -15
80 85 90 95 00 05 10
Developed Chile Latin America
(*) Gray area shows April 2011's WEO forecasts.
Source: International Monetary Fund.
Figure 3
Output gaps (*)
(percent)
4 4
2 2
0 0
-2 -2
-4 -4
-6 -6
97 99 01 03 05 07 09
Developed economies Emerging Asia Latin America
(*) OECD estimates are used for output gaps in developed economies. For the other regions, output gaps are obtained
using an HP filter.
Sources: Central Bank of Chile based on Bloomberg, Consensus Forecasts, OECD and the respective country's statistics
institute.
Figure 4
Current-account balance
(billions of dollars)
1.500 1.500
1.000 1.000
500 500
0 0
-500 -500
-1.000 -1.000
-1.500 -1.500
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Rest of the world Oil exporters Emerging Asia Eurozone
China Japan United States
Source: International Monetary Fund, April 2011's WEO.
Figure 5
Multilateral nominal exchange rate (1)
(index, 2005=100)
140 140
130 130
120 120
110 110
100 100
90 90
80 80
00 01 02 03 04 05 06 07 08 09 10 11
U.S. Commodity exporters (2) Chile
(1) An increase indicates a depreciation of the local currency.
(2) Simple average of Australia, New Zealand and Canada.
Source: Bank for International Settlements (BIS).
Figure 6
Real exchange rate
(index, Jan.00-Mar.11 average=100)
170 170
160 160
150 150
140 140
130 130
120 120
110 110
100 100
90 90
80 80
70 70
60 60
U.S.
U.K.
Rep. Peru
Chile India
Israel
Brazil Japan
Africa China Korea
Russia
Poland
Turkey
Mexico
Canada Norway
Zealand
Hungary
Thailand Malaysia
Australia
Eurozone
Philippines
Czech
South
South
New
Range (*) Average Spot
(*) The range shows maximum and minimum values posted by the local currency during indicated
period.
Figure 7
Change in the Central Bank of Chile's international reserves
(percentage of GDP)
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 -2
-3 -3
91 93 95 97 99 01 03 05 07 09
(*) Reserves consider purchase of US$12.00 billion announced in January this year. For GDP, growth and inflation
forecasts contained in March 2011's Monetary Policy Report are used.
Source: Central Bank of Chile.
Figure 8
Copper price and multilateral dollar (1)
(US$/lb; index, January 2006=100)
5 130
4 120
3 110
2 100
1 90
06 07 08 09 10 11
Copper price Current and one year ahead copper price forecast (3)
Multilateral USD (2)
(1) Gray bars depict forex intervention period. (2) Dollar against currency basket of the U.S.'s main trading partners. An
increase shows an appreciation of the dollar. (3) In Monetary Policy Reports of May 2008 and March 2011, respectively.
Figure 9
Average capital flows to and from emerging economies (*)
(percentage of GDP)
15 15
10 10
5 5
0 0
-5 -5
-10 -10
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Inflows Outflows Net flows
Source: Central Bank of Chile based on IMF data.
(*) Includes Brazil, Chile, China, Colombia, Egypt, Hungary, India, Indonesia, Israel, Malaysia, Morocco, Mexico, Peru,
the Philippines, Poland, Russia, South Africa, South Korea, Thailand, Taiwan and Turkey.
Figure 10
Capital flows to and from Chile (*)
(percentage of GDP)
20 20
15 15
10 10
5 5
0 0
-5 -5
-10 -10
-15 -15
86 88 90 92 94 96 98 00 02 04 06 08 10
Inflows Outflows Net flows
(*) Up until 1995, it shows foreign direct investment and portfolio investments from or in a foreign country, in
the capital account (excluding reserves) of the balance of payments. From 1996 onwards, it shows assets and
liabilities of the financial account flows (excluding reserve assets).
Source: Central Bank of Chile.
Figure 11
Long-term real interest rate
(percent)
9,5 9,5
7,5 7,5
5,5 5,5
3,5 3,5
1,5 1,5
92 94 96 98 00 02 04 06 08 10
PRC 8 years (1) PRC 20 years (1) BCU 10 years (2) BCU 5 years (2)
(1) PRCs are CBC bonds in UF with six-monthly equal installments (except for the last one), which can involve both interest
and principal payments. (2)The BCU is a bond issued in UF, an inflation-indexed unit of account.
Source: Central Bank of Chile.
Figure 12
Banking loans to the private sector
(y-o-y change, percent)
Chile Emerging economies
60 60
90 90
50 50
75 75
60 60 40 40
45 45 30 30
30 30 20 20
15 15 10 10
0 0
0 0
-15 -15
-10 -10
90 95 00 05 10
06 07 08 09 10 11
Brazil Colombia Mexico Peru
Housing Consumer Corporate (*)
China Chile Turkey
(*) Sum of commercial and foreign trade credits.
Sources: central bank of respective country, International Monetary Fund and Superintendence of Banks and Financial Institutions.
Inflation expectations: Average forward breakeven inflation
EES and FOS (*) based on swap rates
(percent) (moving weekly average, 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
FOS one year ahead FOS two years ahead
06 07 08 09 10 11
EES at Dec.11 EES one year ahead
1 in 1 3 in 2 5 en 5
EES two years ahead
(*) FOS uses survey of the first half of indicated month.
Source: Central Bank of Chile.
Figure 14
Retail sales and new car sales (1) (2) Labor market (3)
(index, 2003=100) (percentage; millions of persons)
14
3.0
250 380
12 2.8
225 330
200 280
10 2.6
175 230
8 2.4
150 180
125 130
6 2.2
100 80
4 2.0
06 07 08 09 10 11
03 04 05 06 07 08 09 10 11
Durable goods
New cars
Unemployment rate
Non-durable goods
Employment
(1) Seasonally-adjusted series. (2) Sold during moving quarter. (3) Uses Universidad de Chile's Employment-Unemployment Survey
for Greater Santiago. Seasonally-adjusted series.
Sources: National Automobile Association of Chile, Central Bank of Chile, National Chamber of Commerce and Universidad de Chile.
Inflation indicators
(y-o-y 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.
Figure 16
World: MPR and expectations (1)
(percent)
14 14
12 12
10 10
8 8
6 6
4 4
2 2
0 0
00 02 04 06 08 10 12
Developed (2) Emerging (3) Chile (4)
(1) Solid lines show simple average of reference rates of each group of countries. Dots show Bloomberg median of analysts
survey about expected MPR. EES is used for Chile. (2) Includes Canada, Eurozone, Japan, Norway, Sweden, Switzerland, the U.K.
and the U.S.. (3) Includes Brazil, Colombia, China, the Czech Rep. Hungary, Mexico, Peru, Poland, South Africa and South Korea.
(4) Data before the nominalization of reference rate (August 2001), consider overnight interbank rate in real terms plus CPI
inflation.
Sources: Central Bank of Chile, the respective countries' central banks, Bloomberg, and International Monetary Fund.
BIS central bankers' speeches
Figure 17
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 May11 FOS 1Q May11 MPR
Source: Central Bank of Chile.