However, as I will discuss below, in practice the rationale for considering monetary aggregates is a little different. What variables should a central bank consider when setting the interest rate? In the regime I just described, the answer to this question is pretty simple: anything affecting inflation over a two-year horizon. Variables such as inflation expectations, wages, output, the exchange rate, commodity prices, and so on, have important effects on inflationary forecasts and must be taken into account when deciding the future path of monetary policy. There are other variables that have caught particular attention and I would like to take a brief look at them. These are the prices of assets (e.g., stocks, housing), the exchange rate and monetary aggregates. Two questions arise with regard to asset prices. One is, should they influence monetary policy decisions? And the other is, what must be done when those prices contain speculative bubbles? I will address this second question in the next section. But it must be noted that we must avoid the confusion between inflation and financial stability. Concern about asset price bubbles and distortions is at the core of financial stability analysis, but its impact on inflation is different. If stock or housing prices affect future inflation, they should be taken into account in monetary policy decisions. And this actually occurs via the effect of these prices on aggregate demand, output and, in the end, inflation. Hence, the monetary policy seems to have a stabilizing effect by leaning against the wind.

Pablo García Silva: Changing landscape - the role of the insurance sector in meeting emerging economic and social challenges Welcome remarks by Mr Pablo García Silva, Deputy Governor of the Central Bank of Chile, at the Annual Conference of the International Association of Insurance Supervisors (IAIS), organised by the Financial Market Commission (FMC), Santiago, 10 November 2022. *** This year´s conference is on the role of the insurance sector in meeting emerging and economic and social challenges. This is quite appropriate, as past are the days when longevity risk, low interest rates, anemic growth and secular stagnation seemed to be the main concerns of the insurance industry. Recent years have put significant stress on global capital markets and on the insurance industry, through high inflation and disruptions in financial markets. Looking ahead, supervisory and regulatory authorities need to be on top of these developments to adapt accordingly. The external macroeconomic scenario has evolved negatively in recent months, and risks for global financial stability remain high. A sharp rise in inflation -to which the Russia-Ukraine conflict has certainly contributed- has required a decisive response from central banks, which have had to raise their monetary policy rates considerably. Global growth outlook has weakened, with increasing risks of a global recession in 2023. Thus, financial conditions and liquidity have tightened. The Fed's toughening tone and decisions -and the uncertain future trajectory of its policy- have propitiated a cycle of global strengthening of the dollar and increased the sensitivity of the financial markets to new developments.